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This paper examines the pros and cons of a potential U.S. central bank digital currency, or CBDC, and is the first step in a discussion of whether and how a CBDC could improve the safe and efficient domestic payments system. Money and Payments: The U.S. Dollar in the Age of Digital Transformation (PDF) invites comment from the public. Importantly, the paper does not favor any policy outcome.

The paper summarizes the current state of the domestic payments system and discusses the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC, and identifies specific policy considerations.

Consumers and businesses have long held and transferred money in digital form, via bank accounts, online transactions, or payment apps. The forms of money used in those transactions are liabilities of private entities, such as commercial banks. Conversely, a CBDC would be a liability of a central bank, like the Federal Reserve.

While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. The paper discusses these and other factors in more detail.

To fully evaluate a potential CBDC, Money and Payments: The U.S. Dollar in the Age of Digital Transformation (PDF) asks for public comment on more than 20 questions. Comments will be accepted for 120 days and can be submitted here.

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Questions related to CBDC and the discussion paper may be emailed to: Digital-innovations@frb.gov

All comments on the Money and Payments: The U.S. Dollar in the Age of Digital Transformation discussion paper, however they are submitted (i.e., electronically or in paper form), may be made available publicly (including by posting on our web site). Comments are not edited for public viewing but are reproduced as submitted. However, the Board reserves the ability to redact information when necessary for technical reasons or to remove sensitive information. The names and addresses of commenters are included with all comments made available for public viewing.

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Last Update: January 20, 2022