The Federal Reserve is considering a central bank digital currency – what does it mean for the USA and the world?

The Federal Reserve Considers Introducing Central Bank Digital Currency

The Federal Reserve, the American central bank, is actively considering introducing a Central Bank Digital Currency (CBDC). Despite publicly denying such action, there are reports indicating that the Federal Reserve continues to research this issue.

CBDC – What Is It?

CBDC is a digital version of fiat currency, which is money issued by the central bank and is usually pegged at a 1:1 ratio to the national currency, such as the US dollar in the case of the USA.

Opinions on CBDC

According to Lael Brainard, a Fed governor, CBDC could be a tool to strengthen the global dominance of the dollar and provide “safe central bank liability in the digital financial ecosystem”.

In contrast, Tom Emmer, GOP Majority Whip, opposes the introduction of CBDC in the USA, fearing that it could lead to excessive financial control and monitoring, similar to the situation in China.

China as Pioneers of Central Bank Digital Currency

China is one of the pioneers in issuing a central bank digital currency through its digital yuan (e-CNY). Considering the Chinese experience, the United States is still researching the potential introduction of CBDC, without making an official decision yet.

Fed Chairman’s Stance

Jerome Powell, the chair of the Federal Reserve, has confirmed that the central bank will not introduce a central bank digital currency without Congressional approval, and user privacy protection is a priority in any potential actions in this area.

Research and Experiments in Hong Kong

Using Hong Kong as an example, where the second phase of a digital currency pilot has begun, one can observe tests of CBDC applications in retail payments and research on “programmability, tokenization, and atomic settlements.”

The above information indicates a growing interest among central banks worldwide in central bank digital currencies and the necessity of further research and analysis before their potential widespread implementation.