Fed May Launch CBDC Review As Soon As This Week

Fed May Launch CBDC Review As Soon As This Week

October 4, 2021

Key Takeaways

  • The Fed may release a CBDC-centered paper this week, seeking input from the public as well as lawmakers.
  • Other nations are further along in their path to a CBDC, with some—like China—already there.
  • Despite this important step, the Fed likely will not make a decision on a CBDC anytime soon.

The U.S. Central Bank is weighing digital currency options and will publish its findings soon, reports say.

Federal Reserve Reportedly Nears Releasing its Long-Awaited CBDC Study

This week, the Federal Reserve could finally begin its long-awaited CBDC review process, according to a report by the Wall Street Journal. As part of this process, the Fed also plans to publish a paper on the possibilities of a U.S. CBDC for both legislators and the public to consider. That said, it appears that the Fed will continue to proceed with caution. 

This comes after a Senate Banking Committee hearing last week in which Powell discussed CBDCs. He said it would be key to collaborate with Congress on the issue.

Fed officials are not in agreement on the issue of a CBDC, so while the review might start this week, a final decision is unlikely anytime soon. Powell said in September that a CBDC would only be rolled out if there were “clear and tangible benefits that outweigh any costs and risks.”

A more formal CBDC review process was already delayed once from earlier in the summer to September, only to be delayed again. 

Other countries have acted first on CBDCs

As with crypto ETFs, some other nations have already made decisions on CBDCs. For example, China has launched a digital yuan. Many more are already entrenched in formal review processes of CBDCs, with Canada seemingly bullish on CBDCs. Moreover, the Hong Kong Monetary Authority, Hong Kong’s central bank, released a technical white paper on its own CBDC,  which it has been researching since 2017.

While Fed Governor Lael Brainard says that the US needs to be the leader and more aggressively tackle its own CBDC, Powell maintains that the US is not behind: “It’s more important to do this right than to do it fast…We’re the world’s reserve currency, and I think we’re in a good place to make that analysis and to make that decision.” Others, like Fed Vice Chair Randal Quarles, wonder if a CBDC is even necessary given the existing utility of stablecoins.

The Federal Reserve’s stated goals are to provide the nation “with a safe, flexible, and stable monetary and financial system.” 

(Disclaimer: The author of this piece owns BTC, ETH, and several other cryptocurrencies.)

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