The board of governors of the US Federal Reserve System recently published a research paper highlighting what it perceives to be the pros and cons of developing and issuing a central bank digital currency (CBDC) to keep up with anonymous foreign powers.
As Cointelegraph reported in 2021, US Federal Reserve Chairman Jerome Powell stated that the development of a US CBDC is a “very high priority” for the government.
CBDCs are digital currencies controlled by the government that issues them. Proponents argue that the issuance of a US CBDC will strengthen the dollar's position as a de facto international currency.
Detractors, on the other hand, insist that a CBDC will open the doors to centralization, invasion of privacy, and the ability of US authorities to freeze assets at any time.
In the recent Federal Reserve paper, a pair of high-level economic analysts examined the possible implications of a US CBDC on the dollar and its role in international payments.
“More than 90% of central banks are exploring CBDCS,” the researchers write, adding that the Federal Reserve is also exploring “the implications and options for introducing a CBDC.”
Keep the dollar competitive
Researchers seem to focus most of their concern on whether the dollar can compete with foreign CBDCs if the United States does not issue its own.
According to the document, there are few fears that the US dollar's position as a “unit of account” or “store of value” will be affected by the arrival of a “large and stable foreign CBDC” outside US jurisdiction.
However, researchers continue to state that the dollar could lose ground as a global resource for international transactions:
“Depending on the design features of other CBDCs (or foreign currency-denominated stablecoins), there is some potential for the dollar's role as a medium of exchange to be eroded if a US CBDC is not issued or has unattractive design features.” “.
Politics and polls
CBDCs have been a contentious point of disagreement among many American politicians. 2024 US presidential candidate and former President Donald Trump has vowed that, if elected, he will defeat any move to produce a CBDC while he is in office.
Related: Former US President Trump is no longer against Bitcoin and says he can 'live with it'
Meanwhile, a group of five US senators recently proposed a bill that would effectively ban CBDCs in the country. A survey conducted in May 2023 showed that only 16% of respondents in the US would support a CBDC.
