The United States Federal Reserve Board has made a historic announcement on Wednesday stating that the central banking system is now officially considering the Central Bank Digital Currency (CBDC).
Why is the Federal Reserve considering a #CBDC now? (1/3)For more: https://t.co/BZ84GMKdR4https://t.co/A8aHz7H2FO— Federal Reserve (@federalreserve) April 13, 2022
In a thread posted on Twitter (NYSE:TWTR) the US financial authority declared that no decision on issuing a national digital currency has not been made yet. Nevertheless, the FED Board has been exploring “the potential benefits and risks of CBDCs from a variety of angles”, that include technological research and experimentations.
The institution further explained why it is considering CBDCs now, arguing that the global situation is changing and central banks worldwide have to adapt to it in order to promote monetary and financial stability, as well as efficiency of the payment system:
“With technological advances ushering in a wave of new private-sector financial products and services, including digital wallets, mobile payment apps, and new digital assets such as cryptocurrencies and stablecoins, the Federal Reserve and other central banks around the globe are exploring the potential benefits and risks of issuing a CBDC,” the FED stated.
As the key potential benefits of digitized national currency, FED named its ability to provide households and businesses “a convenient, electronic form of central bank money with the safety and liquidity that would entail”. It also noted that CBDC could act as a platform to create new financial products and services for entrepreneurs, as digital dollar could “support faster and cheaper payments (including cross-border payments) and expand consumer access to the financial system.”
Among the biggest risks of CBDC, the US financial authority named unclear impact on how digital money could affect financial-sector market structure, the cost and availability of credit, the safety and stability of the financial system, and the efficacy of monetary policy.
The World Is Interested
The world’s largest economy, the United States, has been one of the latest countries to join the list of those exploring CBDC.
Bahamas issued its CBDC called Sand Dollar back in 2020, becoming the world’s first country with a digitalized national currency. The same year, China started its own CBDC trials and currently has pilot digital yuan programs running in 12 local cities, including the capital Beijing and Shanghai.
Multiple other countries, including the EU members, are joining the club. As the estimations of accountant giant PwC says, around 80% of the world’s central banks are considering launching a central bank digital currency (CBDC) or have already done so.
