1/20, 8:30 PM (Source: TeleTrader)
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Fed: US digital currency must be privacy-protected

The United States Federal Reserve released on Thursday a paper on its discussions about the pros and cons of introducing a potential central bank digital currency (CBDC). And while the document stressed no official decision has been made yet, it noted that such a currency, if it was created, "would best serve the needs of the US by being privacy-protected, intermediated, widely transferable, and identity-verified."

The Fed said it is still evaluating "a wide range of design options for a CBDC," while highlighting that "protecting consumer privacy is critical." As the main benefit of a digital currency, the institution remarked its aim is to create money that is "free from credit risk and liquidity risk," which would provide safer options for private businesses and transactions, particularly cross-border ones, while also strengthening the dollar's role abroad.

As potential risks, the Fed pointed out "fundamental" changes to the country's financial system, as it could reduce bank deposits and credit availability, which would in turn "raise credit costs for households and businesses." It could also decrease institutional overseeing of transactions, making the system less safe and privacy protection less strict. Fed Chair Jerome Powell thus urged the public to get engaged in the discussion about CBDC, saying that "we look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the US."

Baha Breaking News (BBN) / JR