- The United States Federal Reserve is expanding its exploration of CBDCs in a bid to find any “intrinsic value” they may have.
- It comes after Federal Reserve Chair, Jerome Powell encourages taking the lead on innovation whilst remaining cautious.
- China’s ‘digital yuan’ has already surpassed 4 million transactions
Economists at the United States Federal Reserve have ramped up their research into CBDCs n the hope to explore their “intrinsic value”.
The United States Federal Reserve has expanded its research into central bank digital currencies (CBDCs) in a new review released this Monday.
In the review, economists bring together research on the impact of CBDCs, focusing on the financial system and monetary policy. It also proposes a framework that could be used to predict how they might influence adoption as well as drive financial stability.
A literature review is an exploratory document usually used as a basis to determine the focus of a further, deeper study after considering current literature on a certain topic.
Earlier this year, the US Federal Reserve published a paper that compared CBDCs with other means of payment. In it, the Federal Reserve reached the conclusion that they would “never be able to fully replicate” legacy payment systems but could provide an enhancement.
This cautious but willingness to explore approach has been expressed by the Federal reserve before. Chair Jerome Powell has expressed his reluctance to CBDCs, saying that a Federal Reserve-backed ‘digital dollar’ is not likely to be achievable in the new future, but the US has an obligation to lead financial innovation.
Meanwhile, central banks across the world are taking a more hands-on approach to digital currencies. China has already piloted its ‘digital yuan’ which recently recorded over 4 million transactions worth over $299 million.
Moreover, the European Central Bank has recently launched an opinion-finding initiative aimed at gauging the opinion of Europeans on using a potential ‘digital euro’.
Today’s step by the US Federal Reserve to ramp up exploring CBDCs is an important step to development, however, once again, the US risks falling behind if it doesn’t soon take action.