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Federal Reserve Releases Paper on U.S. Central Bank Digital Currency

On January 20, 2022, the Board of Governors of the Federal Reserve System (“Federal Reserve”) released a long-awaited paper on U.S. central bank digital currency (“CBDC”), Money and Payments: The U.S. Dollar in the Age of Digital Transformation.  

Although not a rulemaking in any formal sense, the paper characterizes itself as “the first step in a public discussion between the Federal Reserve and stakeholders about CBDC,” and requests comments on a wide range of questions, seeking to foster a broad dialogue about CBDC. Comments on the questions included in the paper, which focus on benefits, risks, related policy considerations as well as design of CBDC, are due by May 20, 2022.

The Federal Reserve makes clear that it is not yet prepared to embrace any particular policy outcome, and the paper is not intended to signal that decisions about CBDC are imminent. Rather, the Federal Reserve commits only to take further steps toward developing a CBDC if research suggests that the benefits of CBDC for households, businesses and the economy overall would exceed the downside risks and that CBDC is superior to alternative approaches to payments. In particular, it is clear that the Federal Reserve does not intend to proceed with issuance of a CBDC without guidance from the executive branch and from Congress, preferably in the form of specific authorizing legislation.