U.S. Central Bank Digital Currency

Months after initially promising to release a discussion draft on central bank digital currency (CBDC), the Federal Reserve is now seeking comment on whether and how it might create one. Reflecting the hesitancy of several FRB leaders, Chairman Powell included, the draft emphatically states that the Board has made no decision to issue a CBDC and, should it do so, it will seek at least tacit approval from both Congress and whichever Administration is in charge at the time. However, despite this highly-conditional approach, the discussion draft also emphasizes several initial decisions the Fed appears to have made. These would preserve the role of cash and private-sector financial intermediation as well as establish goals for other policy objectives (i.e., privacy protection, illicit-finance prevention, reserve-currency preservation).