Fed Releases Long-Awaited Study On a Digital Dollar (cnbc.com) 38
The Federal Reserve on Thursday released its long-awaited study of a digital dollar, exploring the pros and cons of the much-debated issue and soliciting public comment. CNBC reports: Billed as "the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies," the 40-page paper (PDF) shies away from any conclusions about a central bank digital currency, or CBDC. The report originally was expected in the summer of 2021 but had been delayed. Instead, it provides an exhaustive look at benefits such as speeding up the electronic payments system at a time when financial transactions around the world already are highly digitized. Some of the downside issues the report discusses are financial stability risks and privacy protection while guarding against fraud and other illegal issues.
"A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank," the report says. One primary difference between the Fed's dollar and other digital transactions is that current digital money is a liability of commercial banks, whereas the CBDC would be a Fed liability. Among other things, that would mean the Fed wouldn't pay interest on money stored with it, though because it is riskless some depositors may prefer to keep their money with the central bank.
The paper lists a checklist of 22 different items for which it is soliciting public feedback. There will be a 120-day comment period. Fed officials say the report is the first step in an extensive process but there is no timetable on when it will be wrapped up. The paper released Thursday notes that the Fed's "initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified." However, the report also states that it "is not intended to advance a specific policy outcome and takes no position on the ultimate desirability of" the digital dollar. The report notes that the speed of the project is not a top priority. Instead, the authors of the report are focused on getting it right. "The introduction of a CBDC would represent a highly significant innovation in American money," the report says. "Accordingly, broad consultation with the general public and key stakeholders is essential. This paper is the first step in such a conversation."
The Fed also said that it will not proceed without a clear mandate from Congress, preferably in the form of "a specific authorizing law."
"A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank," the report says. One primary difference between the Fed's dollar and other digital transactions is that current digital money is a liability of commercial banks, whereas the CBDC would be a Fed liability. Among other things, that would mean the Fed wouldn't pay interest on money stored with it, though because it is riskless some depositors may prefer to keep their money with the central bank.
The paper lists a checklist of 22 different items for which it is soliciting public feedback. There will be a 120-day comment period. Fed officials say the report is the first step in an extensive process but there is no timetable on when it will be wrapped up. The paper released Thursday notes that the Fed's "initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified." However, the report also states that it "is not intended to advance a specific policy outcome and takes no position on the ultimate desirability of" the digital dollar. The report notes that the speed of the project is not a top priority. Instead, the authors of the report are focused on getting it right. "The introduction of a CBDC would represent a highly significant innovation in American money," the report says. "Accordingly, broad consultation with the general public and key stakeholders is essential. This paper is the first step in such a conversation."
The Fed also said that it will not proceed without a clear mandate from Congress, preferably in the form of "a specific authorizing law."
By the time they get it figured out... (Score:2)
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This is not just another dogecoin clone.
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If it's not mineable, who would want it?
Is this just an extension of ACH? If so, why not just actually fix the ACH system and make them instant instead of "3 to 5 fucking business days"?
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Do not underestimate the system. The system has been around a long time. I remember in the 90s thinking how the web would never be corrupted by the system. You know, it sees censorship as a flaw and routes around it. Information wants to be free!
Well nothing is more of a threat to the system than cryptocurrency. The ability to control the money supply is essential to the current power structure, and they will not lose that control without a fight. And do not underestimate the fight they can put up. Put succ
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Put succinctly the government is the one entity with the power to arrest you. That would be the last step, but it is on the table.
You bet it's on the table. Tax evasion is a serious crime.
There's zero chance governments (all of them) will allow a currency not controlled and monitored by them to take over. Doing otherwise would mean the downfall of all government since there goes their revenue stream. It's pretty easy for a govt to outlaw the use of a currency as legal tender. Sure it'll live on among criminals, but that's as far as it'll go. If average Joe can't use it to buy gas , pay their utility bill, or buy dinner it can only spr
bg (Score:5, Funny)
PRO: the government can easily snoop on every transaction you make.
End of study
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To some degree we're already there (Score:5, Insightful)
Re:To some degree we're already there (Score:5, Informative)
Re:To some degree we're already there (Score:4, Insightful)
"The only problem with digital dollars is in how easy it is to lend more of them into existence."
This is the only reason why the Fed wants a "Digital Dollar" and why they don't just say: "errr, duhh. Someone beat us to the punch. Let's all just use Bitcoin."
It's because Bitcoin doesn't let them inflate the economy (and decrease the value of your currency) whenever the hell they want to.
You Pyrite Pete? (Score:1, Insightful)
This is the only reason why the Fed wants a "Digital Dollar" and why they don't just say: "errr, duhh. Someone beat us to the punch. Let's all just use Bitcoin."
That and the fact nobody wants to spend days waiting in the checkout queue waiting for the payments to be processed.
Oh, and the fact it will cost more ion fees than the cost of your small purchase.
It also uses way too much electricity.
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That and the fact nobody wants to spend days waiting in the checkout queue waiting for the payments to be processed.
That was 5 years ago. Lightning network solved that problem quite a while ago.
cost more on fees than the cost of your small purchase.
That's where 2nd tier cryptocurrencies come in handy. Doge hovers around $0.50 which is competitive with Visa, and the 3rd-tier currencies are even cheaper.
It also uses way too much electricity.
I'd suggest going Cardano or Stellar Lumens if energy efficiency is your goal. Or Chia that uses disk space rather than active mining.
Re: You Pyrite Pete? (Score:2)
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That is a series of workarounds to individual problems, not a solution.
Workarounds add complexity and vulnerabilities (points of failure/attack surfaces), but do not fix the flaws in the system.
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Also the bitcoin fees are optional. It amazes me how many people don't know this.
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That's one particular implementation of cryptocurrency. Others have been proposed, and perhaps even exist. One could certainly do a version based off a one-time pad, though that would probably need a hard tie back to physical resources, the way "silver backed dollars" used to have.
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The US Dollar is a digital currency.
Most of my dollars are numbers in an account maintained by a bank/brokerage. Most of my daily transactions, purchases and sales (I own a retail business), are digital transactions. Very little hard currency physically changes hands. No large purchases are done with physical currency.
We still allow paper coupons and coins but most financial transactions are digital only.
We do not need a crypto-dollar. We already have a digital dollar. We have credit, debit, bank-bank
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Obviously cryptocurrency has already solved all other functionality such a 'dollar' could offer and private payment networks have provided much of the convenience with the actual dollar.
It's barely anything like this (Score:2)
Any CBDC coming from the Fed is likely to be the stuff of pure dystopian terror given the level of centralization that Saule Omarova was proposing before getting stomped during the nomination process.
Imagine a cryptocurrency, with no independent miners or validator nodes, completely under the control of an oligarchy that is not accountable to Congress in many meaningful ways. That's "FedCoin."
With that level of control, they can unperson you immedi
Genuinely curious (Score:3)
Re: Genuinely curious (Score:2)
The Fed can not engage in financial censorship of legal conduct, private digital money transfer and banking services can.
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I'm not sure I'd count on that. Monopolies are bad whether they're private or government monopolies.
If the cultural winds are blowing one way and Citi decides that they won't allow money transfers for abortion services, then I can switch to BoA. If the winds blow the other way and BoA decides that they won't allow firearm transactions, I can switch to my local credit union. If the Fed is the only game in town, then whichever way the winds blow, they've got a monopoly and I don't have much choice. Perhaps t
Re: Genuinely curious (Score:2)
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The dysfunction is they don't have 100% transparency into every private exchange of value in the country. Others consider that a feature and not a bug.
Nothing Good For Americans (Score:2)
No thanks.