The Federal Reserve will ramp up its exploration of a digital dollar later this summer, Federal Reserve Chairman Jerome Powell announced on Thursday.
In order to “help stimulate broad conversation,” the Fed will issue a discussion paper this summer outlining the central bank’s “current thinking” on digital payments and the benefits and tradeoffs of a central bank digital currency, or CBDC, Powell said in a statement.
The Fed has already been exploring the benefits and tradeoffs of a digital currency for the past several years, Powell said.
Last summer, a team at the Boston Fed started to work with researchers at the Massachusetts Institute of Technology to find out what it would take to build a U.S.-backed digital currency.
A Fed-backed digital dollar wouldn’t be a cryptocurrency based on decentralized blockchain, the ledger-based technology that underpins traditional digital currencies like bitcoin BTCUSD, -0.08%. It would merely be a digitized form of the fiat dollars that the Fed issues, and with which Americans are the most familiar, essentially antithetical to assets like bitcoin, in the eyes of cryptocurrency purists.
China has made headlines recently when it rolled out tests of a new digital yuan.
In his message, Powell stressed any potential digital dollar would not be a replacement of cash or current private-sector digital forms of the dollar, such as deposits at commercial banks.
Progressive Democrats view the creation of a “digital dollar,” along with accounts for every American at the central bank, as ways to assist poor Americans who don’t have access to the banking system.