The Federal Reserve’s Discussion Paper on Central Bank Digital Currencies: Seven Things To Know

The Federal Reserve’s Discussion Paper on Central Bank Digital Currencies: Seven Things To Know

January 24, 2022, Covington Alert

The Board of Governors of the Federal Reserve System (the “Federal Reserve”) released an important discussion paper on January 20, 2022 entitled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation” (the “Discussion Paper”). The Discussion Paper examines the advantages and disadvantages of a potential U.S. central bank digital currency, or “CBDC”. Although the Discussion Paper carefully avoids any commitment by the Federal Reserve to future development and issuance of a CBDC, it nonetheless identifies a number of key benefits that a CBDC could offer and provides a clear sense of how the Federal Reserve might approach key policy choices associated with developing a CBDC, should it decide to move forward. The Discussion Paper also seeks comment from the public on a number of related questions; comments are due by May 20, 2022.