Crypto

The Fed on creating a digital dollar: ¯\_(ツ)_/¯

The central bank “takes no position” on a digital dollar for now, per a report it released last week.
article cover

Federal Reserve

· less than 3 min read

Stay up to date on emerging tech

Drones, automation, AI, and more. The technologies that will shape the future of business, all in one newsletter.

After a few months of delay, the Federal Reserve released its study on if the US should create a central bank digital currency (CBDC), and, for now, its answer is…¯\_(ツ)_/¯. The central bank wrote that it “takes no position on the ultimate desirability” of a digital dollar.

Why we’re talking about this: In 2021, crypto went from something to keep an eye on to something impossible to look away from. At the same time, central banks around the world accelerated their efforts to roll out digital currencies (mostly as pilots, for now).

  • Right now, 87 countries are exploring a CBDC, per the Atlantic Council—more than double the 35 countries that said they were interested in May 2020. These 87 countries represent more than 90% of global GDP.

As a reminder, digital currencies are not the same as crypto. There’s not even a veneer of decentralization here (ahem, central bank digital currency). The main benefits of a CBDC are thought to be faster, simpler, and cheaper payments, as well as greater access to digital banking for lower-income people.

  • The Fed report cited these familiar benefits, plus a selfish one: “A US-issued CBDC could be to preserve the dominant international role of the US dollar.”
  • As for the risks, they include potential financial instability, privacy breaches, and misuse, according to the report.

Zoom out: In October 2020, Nigeria became the largest country, both in economic and in population terms, to fully roll out a digital currency. Three weeks after the eNaira’s debut, the country of ~211 million reported that 480,000 people had downloaded the consumer wallet needed to use the digital currency, and 62 million naira (~$150,000) had been transacted.

Looking ahead…The next step in the US is a 120-day public comment period. As of now, there’s no timetable for a decision.

Stay up to date on emerging tech

Drones, automation, AI, and more. The technologies that will shape the future of business, all in one newsletter.