On January 20, the Federal Reserve (Fed) released a much-anticipated discussion paper examining the pros and cons of a potential U.S. central bank digital currency (“CBDC”). To fully evaluate a potential CBDC, the Fed asks for public comment on more than 20 questions. Comments will be accepted for 120 days and can be submitted here.

The Fed that while 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 some risk.  The Fed does not intend to proceed with the issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law. A summary of key points from the paper is below.


  • CBDC offers the public broad access to digital money that is free from credit and liquidity risk. CBDC could reduce common barriers to financial inclusion and lower transaction costs helping low-income and underbanked individuals.
  • CBDC has the potential to streamline cross-border payments by using new technologies, introducing simplified distribution channels, and creating additional opportunities for cross-jurisdictional collaboration and interoperability. Simultaneously, CBDC could be used to preserve the dominant international role of the U.S. dollar.


  • CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank, altering the supply of reserves in the banking system, and affecting monetary policy implementation.
  • CBDC would need to strike an appropriate balance between safeguarding consumer privacy rights and affording the transparency necessary to deter criminal activity. A new kind of currency would open the door to new kinds of threats. Thus, designing defense mechanisms for CBDC is crucial to its implementation.

Putting It Into Practice: While the Fed takes no position and does not set a timeline for when a CBDC would be implemented, both institutions and individuals should pay special attention to CBDC developments within the Fed. The Fed is also engaged in several experiments related to digital currencies and countries like China, Sweden, and the Bahamas have already launched a CBDC. Individuals interested in those developments should pay attention to changes to CBDC globally. CBDC could potentially improve the U.S. financial system and overhaul money as we know it today.