CBDC (Central Bank Digital Currency) is a digital currency issued by the central bank. It will be a commitment of the Fed. In essence, this means risk-free CBDC. In addition, the Federal Reserve will not pay interest on the money stored in it.
Pros and cons - two sides of the coin.
The advantages of the new digital currency are the acceleration of the electronic payment system and the reduction of the cost of financial transactions, especially remittances abroad.
The most notable advantage of CBDC is the speed of the Fed-controlled system to quickly obtain incentive payments to people and provide financial services to people who do not have access to banking services.
Disadvantages include risks to financial stability and difficulties in protecting confidentiality while protecting against fraud and other illegal activities.
The advent of the digital dollar could have implications for commercial banks. If people prefer to keep the new currency in "digital wallets" from payment service providers, rather than use banking services, the size of bank deposits will be reduced.
The promotion of the digital currency of the US Federal Reserve stimulates competition with China, which is actively developing its own digital yuan.
The report says the introduction of the CBDC will be an important innovation that could significantly change the structure of the US financial system by renewing the roles and responsibilities of the private sector and the central bank.
Therefore, the process of considering the possibility of implementing the digital dollar will be long, no deadlines have been set. Publishing the report is only the first step, now there will be a 120-day comment period.
Follow our news.