The U.S. Federal Reserve is opening comments to the public after releasing a discussion paper on the pros and cons of a potential central bank digital currency.

In a publication released Thursday titled “​​Money and Payments: The U.S. Dollar in the Age of Digital Transformation”, the Fed said it would likely not be authorized to issue digital wallets or accounts capable of holding a U.S. central bank digital currency, or CBDC, but rather leave such matters to the private sector. In addition, the government body said it would be considering privacy concerns, whether a CBDC could be “readily transferable between customers of different intermediaries,” and identity verification to combat money laundering and the financing of terrorism.

The paper added that the U.S. rolling out a CBDC could mitigate the risks of “proliferation of private digital money” while still encouraging innovation in the private sector, leveling the playing field between large and small firms for whom some of the costs of issuing their own digital currency may be prohibitive. Cross border payments, the speed and efficiency of digital payments, and additional financial inclusion are all among the potential benefits of a digital dollar.

“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,” said the Fed paper. “Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease — and a U.S. CBDC might…


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