Transforming the U.S. Payment System: The Rise of Digital Technology

January 31st, 2022

hand holding a phone showing payment processing

Transforming the U.S. Payment System

On January 14, the Federal Reserve released its long-awaited white paper on central bank digital currencies (CBDCs). The paper states that the current financial system could be strengthened by the creation of a CBDC that works within the existing network of private banks rather than a CBDC that the Federal Reserve issues directly to consumers. The Fed did not commit to creating a digital dollar but did explain its questions in approaching the issue and asked for public feedback. The intermediaries handling CBDCs could be commercial banks or non-bank payment entities. Still, the Fed wants to avoid consumers setting up personal accounts at central bank locations to access CBDCs. Cybersecurity, financial crimes, and future needs are considerations that the Fed must consider before it can issue a CBDC, and it wants "clear support" from the executive branch of the federal government and Congress before moving forward.

The full copy of the Money and Payments: The U.S. Dollar in the Age of Digital Transformation whitepaper can be found on the Federal Reserves's website. Read the full text

The Federal Reserve has requested feedback from all stakeholders on the questions listed on Federal Reserves's website. Participate and provide feedback. Feedback is due by May 20, 2022, and it's not required to comment on all questions.

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