The Federal Reserve is studying cryptocurrency and is examining a central bank digital currency.
The Fed will issue a discussion paper this summer — an early first step — focusing on a potential CBDC, and take public comment. Fed Board Chair Jerome Powell cited the risks of digital assets as one reason for the study. The announcement comes as a number of federal agencies scrutinize cryptocurrency amid a wave of interest in crypto trading.
"We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks," Powell said in a video released Thursday. "The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials."
Powell also cited stablecoins as one way to improve payments, but warned of potential risks.
"These stablecoins aim to use new technologies in a way that has the potential to enhance payments efficiency, speed up settlement flows, and reduce end-user costs — but they may also carry potential risks to those users and to the broader financial system," he said. "For example, although the value of a stablecoin may be tied to the value of a dollar, these coins may not come with the same protections as traditional means of payment, such as physical currency or the deposits in your bank account.
Other governments such as China have moved much more quickly on CBDCs.