The US Federal Reserve Explores Possibilities of Adopting CBDCs

The US Federal Reserve confirmed it is now looking into creating a Central Bank Digital Currency (CBDC).

The digital form of the central bank’s money is known as Central Bank Digital Currency. The CBDC, which will be readily available to the public, will be the Federal Reserve’s obligation. The general currency will still be the central bank’s liability.

The Federal Reserve’s decision to implement a CBDC is still on hold as it’s being investigated. They are continuously researching and weighing the CBDCs’ possible benefits and hazards.

After conducting one of their studies, the Federal Reserve stated that even if CBDCs become the reserve’s liability, they will still be considered the safest digital asset the government can offer to the public. CBDCs have lower liquidity and credit risk compared to the existing digital assets on the market.

CBDCs will not replace fiat currency, according to the Federal Reserve, but can be regarded as the safest way to explore payment options.

The Federal Reserve was drawn to the new advancements in payment methods and product options, like digital wallets and payment apps. The rapidly growing popularity of digital currencies, such as cryptocurrencies and stablecoins, is their primary motivation for investigating the world of digital assets and CBDCs.

According to the Federal Reserve, CBDCs will help consumers and businesses to easily conduct quicker and more affordable payments. On the other hand, they also pose a threat to the financial market structure and the financial system’s stability.

In other news, Boston’s Federal Reserve Bank is also testing the technological viability of a general-purpose CBDC. The bank is in collaboration with MIT’s Digital Currency Initiative, working on a multi-year exploratory research project. The collaboration’s goal is to create a general-purpose CBDC to accommodate an economy the size of the United States.

Currently, the Federal Reserve is hoping for an open and honest dialogue with the general public about CBDCs in order to assess the potential risks and advantages. They stated that they will not issue a CBDC until the requisite legislation and structure are in place from the relevant organizations and governments.