WASHINGTON: The Federal Reserve on Thursday released a much-anticipated report on central bank digital currencies, suggesting it is leaning toward banks and other financial firms, rather than the Fed, managing digital accounts for customers.
A central bank digital currency will differ in some key ways from the online and digital payments that millions of Americans already do. For this the user does not necessarily have a bank account. The Fed’s paper stressed that while no final decision has been made, it would likely follow an intermediate model for a digital dollar under which banks or payment firms would create accounts or digital wallets.
Such government-issued digital dollars could have major consequences for commercial banks as many Americans may prefer to keep such currency in wallets issued by a payment provider such as PayPal or Venmo, potentially cutting back on bank deposits. are. It will also compete with the growing stablecoin market and could reduce the cost of financial transactions, especially foreign remittances.
Still, if the Fed decides to do so, the Fed is years away from actually issuing a digital currency. The paper released on Thursday kicks off a 120-day comment period during which the Fed will be seeking input from the public. Fed officials said the central bank had not made any decisions about the digital currency or how it would work. The Fed said it would only proceed if Congress passed a law specifically authorizing a digital currency.
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