The Federal Reserve Board of Governors and several Federal Reserve Banks are actively working on the digital dollar. Legislation has proposed that each American could have an account at the Fed for transacting in the central bank digital currency.
Several Digital Dollar Initiatives
The president of the Federal Reserve Bank of Cleveland, Loretta J. Mester, outlined the Fed’s work on the country’s central bank digital currency (CBDC) during a speech at the 20th Anniversary Chicago Payments Symposium on Wednesday. Noting that the experience with emergency payments led by the coronavirus pandemic has accelerated the work in this area, Mester detailed:
Legislation has proposed that each American has an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments.
She added that “Other proposals would create a new payments instrument, digital cash, which would be just like the physical currency issued by central banks today, but in a digital form and, potentially, without the anonymity of physical currency.”
Mester explained that some designs of the digital dollar allow the central bank to directly issue the CBDC into end users’ wallets using central-bank-facilitated transfer and redemption services, without the involvement of commercial banks.
She further confirmed that “The Federal Reserve has been researching issues raised by central bank digital currency for some time,” emphasizing that various Federal Reserve Banks are part of initiatives to explore the use of a central bank digital currency.
The Federal Reserve Board of Governors has a technology lab called Techlab that has been building platforms and testing a range of technologies relevant to digital currencies and other payment innovations. Staff members from several Federal Reserve Banks, including software developers, are contributing to this effort.
