On January 20, 2022, the Federal Reserve Board ("FRB") issued a discussion paper, Money and Payments: The U.S. Dollar in the Age of Digital Transformation, which it summarizes here. The paper "summarizes the current state of the domestic payments system and discusses the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC [Central Bank Digital Currency], and identifies specific policy considerations." According to the FRB, "the paper does not favor any policy outcome," and the FRB is soliciting comments from the public about the issues discussed in the paper. In particular, the FRB has issued 22 specific questions, including questions about:
- What additional risks may be caused by a CBDC?
- Is there a better way of achieving the same goals?
- What would be the impact on financial inclusion?
- Would a CBDC help or hinder financial stability?
- How should the behavior of other major financial economies affect the decision?
- How could a CBDC provide privacy without providing complete anonymity?
- Would there be any unavoidable cyber risks?
- Should a CBDC pay interest?
- Should there be any "offline" capabilities?
- Are there additional design principles that should be considered?
The FRB is accepting comment on the discussion paper for 120 days.
DISCLAIMER: This article was originally published by McGonigle PC prior to their combination with Davis Wright Tremaine LLP. The article is published here with permission.