Connect with us
Active Currencies 13535
Market Cap $2,787,365,897,669.60
Bitcoin Share 49.88%
24h Market Cap Change $2.27

US Fed economists exploring ‘intrinsic’ value drivers of CBDC

2min Read

Share this article

In its research on central bank digital currencies or CBDCs, United States Federal Reserve published a new review on 9 November exploring the potential impact of a digital dollar on commercial banking and monetary policy.  

Titled “Central Bank Digital Currency: A Literature Review,” the report highlights how the central bank can use CBDC as a means for consumer adoption, financial stability, and the resulting welfare implications. In it t Fed economists Francesca Carapella and Jean Flemming write:

From a theoretical standpoint, the introduction of a central bank digital currency (CBDC) raises long-standing questions relating to the provision of public and private money […] and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households.

The models and assumptions in the literature also provide frameworks to understand effects of CBDC at the micro- and macro-levels. The report also mentions the “intrinsic features of CBDC” which the authors believe was a crucial question to tackle moving forward: 

As with any new literature, many questions remain. We believe the most crucial question is which intrinsic features of CBDC as a means of payment and a store of value are important for households’ portfolio choices as to which monies to use.

The review further added that understanding consumer payment choice was important as CBDC would “expand” the set of payment and savings options available to households.

Back in August, the Fed published a research paper that compared CBDCs with other payment methods. In it, the authors believed that a CBDC would “never be able to fully replicate” cash but that CBDC could enhance the mode of payment.

Last month, the former chair of the Commodity Futures Trading Commission had mentioned in a report about how the US dollar may lose status in the future in the likelihood of central banks from other countries launching their own digital currencies.

Meanwhile, Governor of the central bank of China, Yi Gang, recently revealed that in its CBDC pilot program, the digital yuan had already been used in over four million transactions totaling more than 2 billion yuan (about $299 million) to date.

However, the race to be the first to issue a CBDC does not seem to worry the U.S. In fact, the country’s Federal Reserve’s chairman, Jerome Powell had emphasized that the U.S. would rather “get it right” than to be the first, in terms of issuing its CBDC. Powell believed that resolving risks to privacy and security was much more important in that aspect.

Share

Alisha is a full-time journalist at AMBCrypto. Her interests lie in blockchain technology, crypto-crimes, and market developments in Africa and the United States
Read the best crypto stories of the day in less than 5 minutes
Subscribe to get it daily in your inbox.
Please check the format of your first name and/or email address.

Thank you for subscribing to Unhashed.