A new document released by the Federal Reserve has outlined some of the preconditions for the launch of its Central Bank Digital Currency (CBDC). The U.S. Central Bank is considering broader stakeholder support before coming up with a digitized dollar. The paper also included several factors including clear policy objectives, a strong legal framework, and market readiness.
Preconditions for Issuing a General-Purpose CBDC
The paper listed some notable personalities as its author including Fed Reserve Senior Counsel Jess Cheng, Payments Specialist Angela N. Lawson and Technology Lab Manager Paul Wong.
The authors outlined the basic preconditions necessary for the U.S. central bank before proceeding with the launch of its CBDC. They also pointed out that Congress would have to authorize the Federal Reserve before issuing a general-purpose CBDC.
The authors highlighted that digital currency needs to be backed by robust technology for laying the groundwork for a general-purpose CBDC in the U.S. They argued that a digital currency will need a certain degree of buy-in for stakeholder participation. Public and private partnerships will be considered, including PayPal and MasterCard.
The paper further noted that engaging with individuals, businesses, and consulting with consumer groups, community organizations, and business associations will help in understanding a CBDC’s use case and its potential design. In this matter, think tanks and academia could also play a supporting role. Besides, feedback would be required from the users of various age groups, geographic locations, payment habits for aiding in the design in the basic features of a viable CBDC.
Issuing CBDC in the U.S. Won’t Be An Easy Task
The United States still has a long way to go for developing its CBDC as many systems, tools, structures, and processes are still not yet in place. The authors also pointed out that the Fed still has a long way to go in deciding how to approach the matter as:
“Issuing a CBDC in the United States would not be an easy task. A number of foundational elements would be required”
The paper was released following the Fed’s outage that saw many banks unable to transfer the funds. Following this, the crypto exchanges were affected as they were unable to process the ACH transactions during the outage.