Feds Want Digital Dollar But Can’t Decide How To Control It

Hours after U.S. Federal Reserve Chairman Jerome Powell declared 2021 to be a pivotal year in consulting the public on the digital dollar, his underlings issued a paper describing what that consultation might look like.

In a Wednesday FEDS Notes, Fed Reserve Senior Counsel Jess Cheng, Payments Specialist Angela N. Lawson and Technology Lab Manager Paul Wong said the onus would be on broadly engaging the public regarding the pros and cons of a U.S. central bank digital currency (CBDC). 

Privacy issues, ease of use, security access and delivery mechanisms should all be on the table as Fed officials work to “sharpen” a digital dollar with the public’s help, the paper said. 

And any consultation should likewise include as broad a cross-section of the U.S. population as possible. 

“Engaging with individuals and businesses and consulting with consumer groups, community organizations, and business associations to understand the use case for a CBDC will help in the decision whether to issue a CBDC and its potential design,” the authors wrote.

Think tanks and academia could also play a supporting role, they said. 

The authors also outlined the basic “preconditions” essential to the Fed’s deliberations on how to proceed. 

Digital dollar clarity

The Fed would need to clearly understand what a possible CBDC would be used for, the notes said. The technology used would also have to support the CBDC across different conditions while providing 24/7 instant settlement, secure transfer of assets and resilience. 

Feedback should be drawn from “end users of various ages, geographic locations, payment habits, and financial literacy in the design and testing of a CBDC could help sharpen the basic features of a viable CBDC arrangement,” the note stated.

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