EDITOR NOTE: Central bank digital currencies (CBDCs) are a tricky topic, particularly for sound money advocates, because they present a lose/lose scenario. Falling behind the CBDC race poses a risk to the dollar’s world reserve currency status in the global payments landscape. While establishing an efficient digital currency system allows the Fed to have a true operational monopoly on the entire financial system. It would allow the Fed and the government to manipulate the dollar, surveil your transactions, and force you into consumption every time it pulls the levers on what’s quickly becoming an artificialized economy. On a global and longer-term scale, it appears that CBDCs may claim the future of all domestic and global transactions. But consider that central banks have a history of failing and collapsing their economies. And when the Bank of International Settlements implements the forthcoming Basel III rules, wherein gold becomes a Tier 1 currency, you can bet that commercial and central banks may increase their rate of gold accumulation. Why? Because in the end, they understand their own monetary limits and tendency toward error, failure, and collapse. The closer we get to Basel III, the more rapid the pace of gold buying. Be sure to accumulate as much non-CUSIP gold and silver as you can before mid-June, when a number of steps (beginning with the Fed US Bank Stress Test) begin crumbling the old banking system as we knew it.
Technological advances are driving rapid change in the global payments landscape. The Federal Reserve is studying these developments and exploring ways that it might refine its role as a core payment services provider and as the issuing authority for U.S. currency.
"As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system," Federal Reserve Board Chair Jerome H. Powell said Thursday in a video message. "In pursuit of these core functions we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking."
This technology also offers new possibilities to central banks—including the Fed. In particular, it enables the development and issuance of central bank digital currencies, or CBDCs. A CBDC is a new type of central bank liability issued in digital form. While various structures and technologies might be used, a CBDC could be designed for use by the general public.
As the Federal Reserve explores the potential benefits and risks of CBDCs, the key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S. domestic payments system in its ability to serve the needs of households and businesses. "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. "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 announced that the Federal Reserve plans to publish this summer a discussion paper that will explore the implications of fast-evolving technology for digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency. The paper will complement Federal Reserve System research that is already underway.
The Federal Reserve System is focused on better understanding the full set of opportunities and risks associated with new digital payment mechanisms. More technically oriented projects, focused on specific tools and infrastructure, are underway at the Board and the Federal Reserve Bank of Boston. The Fed is also collaborating internationally in groups such as the Bank for International Settlements' CBDC coalition.
A video message from Chair Powell on payment innovation can be viewed at: www.federalreserve.gov.
Originally posted on Federal Reserve