Fed Studies: CBDC Could Beat RTP; Use of DLT Adds Critical Functionality, Ease of Introduction
As noted late last week, FRB Gov. Brainard announced that the Federal Reserve has begun a cautious review of central bank digital currency (CBDC) with an eye on its role in relation to FedNow (see FSM Report PAYMENT17) and protecting the dollar’s reserve-currency status.  This report assesses two papers laying out initial Fed analyses finding considerable benefit to a properly-configured CBDC and fewer technology obstacles to establishing one than anticipated in FRB Chairman Powell’s letter last year to Congress.  However, neither study assesses policy questions such as the extent to which CBDC is consistent with current law, personal-privacy implications, the future of financial intermediation, monetary-policy impact, or the role of nonbanks.