Pedestrians pass a digital sign announcing the latest rates for currency in Istanbul. Photographer: Kostas Tsironis / Bloomberg
Kostas Tsironis / Bloomberg News
The Federal Reserve announced Thursday that it is building and testing a hypothetical digital currency, equivalent to cash.
The goal of the program is to improve the Fed’s understanding of digital currency, said Fed Governor Lael Brainard, in a speech following a conference on innovation sponsored by the Fed’s San Francisco regional bank.
Brainard went to great lengths to emphasize that the central bank is incapable of issuing digital dollars.
A “separate policy process” that would require tough legal questions if the Fed ever wanted to use a digital currency. The central bank has not made a decision to even begin such a process, Brainard said.
“We are taking the time and effort to understand the key implications of digital currencies and central bank digital currencies around the world,” Brainard said.
“Given the important role of the dollar” as a global reserve currency, it is essential that the Fed stays on the edge of digital currency research and policy development, Brainard said.
“There remains strong demand for U.S. currency and we continue to work to ensure that the public has access to a range of payment options,” Brainard said.
Researchers at the Brookings Institution, in a paper last month, said a central bank digital currency “has in recent years progressed from a bold speculative concept to a seemingly unforgettable one.”
In the wake of the coronavirus pandemic, leading economists have noted that a digital currency would make it easier for the government to send stimulus checks to workers.
Brainard notes that China is rapidly advancing over its version of a central bank digital currency.
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