The Board of Governors of the United States Federal Reserve System has published a research paper discussing the advantages and disadvantages of creating and issuing a central bank digital currency (CBDC) in response to unnamed foreign powers. CBDCs are digital currencies that are controlled by the government that issues them. Supporters argue that introducing a U.S. CBDC would help maintain the dollar’s position as the dominant international currency. However, critics argue that a CBDC would lead to centralization, privacy infringements, and the potential for U.S. authorities to freeze assets at any time.
The research paper, written by two senior economic analysts, examines the potential impact of a U.S. CBDC on the dollar and its role in international payments. The researchers note that over 90% of central banks are currently exploring CBDCs, and the Federal Reserve is also considering the implications and options for introducing its own CBDC.
The researchers express concern about the dollar’s ability to compete with foreign CBDCs if the U.S. does not develop its own. They believe that the dollar’s status as a unit of account and a store of value will not be significantly affected by the existence of a large and stable foreign CBDC outside of U.S. jurisdiction. However, they acknowledge the possibility that the dollar could lose its position as the preferred currency for international transactions.
CBDCs have sparked debate among U.S. politicians, with former President Donald Trump vowing to oppose any attempts to create a CBDC if he is re-elected. Additionally, a group of five senators has proposed a bill that would effectively ban CBDCs in the country. A poll conducted in May 2023 revealed that only 16% of surveyed individuals in the U.S. would support the introduction of a CBDC.