In January of this year, the Board of Governors of the Federal Reserve System issued a research and analysis paper titled Money and Payments: The US Dollar in the Age of Digital Transformation, in which the Fed explores potential benefits and risks of a US central bank digital currency (CBDC). The Fed defines a CBDC for purposes of the paper as a “digital liability of a central bank that is widely available to the general public” and is analogous to a digital form of paper money. In line with this definition, a potential US CBDC is often referred to as the digital dollar.
The Fed is clear in its paper that it was not intended to advance a particular policy outcome or indicate that the Fed is preparing to issue a US digital dollar. Rather, the Fed states that it does not intend to move forward with a US digital dollar absent “clear support from the executive branch and Congress.” As discussed below, the Biden Administration has recently indicated support for a US CBDC under his executive order covering digital assets.
