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FEATURE Crypto Weekly
Federal Reserve Opens Debate on Digital Currencies with Long-Awaited Report Fasika Zelealem
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n Thursday, the Federal Reserve released a report that examines the idea's potential costs and benefits and invites public comments. The news is the first step toward seriously investigating a central bank's digital currency. In the report, the Fed avoided taking sides, set out a list of arguments for and against a digital currency, and posed questions shaping the debate. Jerome H. Powell, the Fed chair, said that the central bank would engage with the public, elected officials, and other stakeholders as it examines the advantages and disadvantages of a central bank's digital currency. Powell
January 2022 | Volume 12
had said a report would be released in May 2021. Central banks from the Bahamas to Sweden and China are experimenting with digital currency offerings, fueling concerns on Capitol Hill that the Fed might fall behind the competition. Breakneck innovation in the private sector has suggested that the Fed, a key financial regulator, needs to understand budding private digital payment technologies. A central bank's digital retail currency would be electronic cash. While consumers already use digital money
when swiping a credit card or making online purchases, that money is actually backed by the banking sector. A Fed version would be backed by America's central bank, just like a U.S. dollar bill. Given the U.S. currency's dominant position in global finance, the Fed has clearly moved slowly and carefully as it weighs a digital dollar. And officials have emphasized that they would not move forward without congressional approval. "The Federal Reserve does not intend to proceed with the issuance of a C.B.D.C. without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing
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