US Federal Reserve: Digital dollar can be a monetary policy tool

Specialists of the US Federal Reserve (FRS) analyzed various studies of digital currencies of the Central Bank and published a report on the results.

According to
a report by Fed researchers, before launching a digital dollar, it is necessary to give a clear answer to the most important question: will the state cryptocurrency become a full-fledged replacement for fiat money and bank deposits? At the same time, it does not matter who will issue the digital dollar – a private firm or the Central Bank itself.

The Fed began exploring the possibility of issuing its own stablecoin back in February. However, the agency believes that in order to fully understand the principles of digital currencies and assess their possible consequences for the country’s monetary system, it is necessary to take into account the achievements of both individual researchers and central banks.

After analyzing various reports on digital currencies from central banks, the Fed notes the concern of politicians that state-owned stablecoins can replace the main source of funding for banks. After the launch of such digital currencies, there will be no need for the services of commercial banks, which in turn will lead to a reduction in their lending. On the other hand, state-owned digital currencies will increase access to financial services for people who do not have a bank account and who cannot use basic financial services.

After studying different points of view on this topic, the experts of the US Central Bank recognized that the digital dollar can act as a tool of the country’s monetary policy. The Fed is carefully studying scenarios for the use of the digital dollar and its possible consequences for the US economy. The crucial factor for issuing a state-owned digital currency is its flexibility, so that the state can quickly respond to macroeconomic shocks. To do this, it is necessary to identify how the digital dollar will differ from the usual means of payments and savings.Last month, Fed Chairman Jerome Powell said that the digital dollar is not a priority for the country. It is much more important to conduct a number of comprehensive studies and eliminate all the associated risks, so that the launch of the digital currency does not take place “in a hurry”. In addition, last year, Powell said that the benefits of the digital dollar are not yet obvious.