The Pros and Cons of a CBDC, According to the Federal Reserve

The Federal Reserve, the central bank of the United States, has released a paper that discusses the benefits and drawbacks of a possible US CBDC. This is the first time that the Fed has held a conversation with the public to discuss whether or not the digital version could be beneficial for the domestic financial system.

Minuses and pluses

Many countries are trying to create their own digital central banks and implement them into their monetary networks, China being the most prominent. However, the USA is not in a hurry. Jerome Powell, Chairman of the Federal Reserve, stated that more than a year ago that the leading economy in the world would first examine the matter carefully and then make decisions.

The Fed recently published a report that outlined the major pros and cons of this financial product.

Powell stated that he looked forward to engaging the public, elected representatives and other stakeholders in order to examine the positives as well as the negatives of a digital central bank currency in the United States.

Source: BBC

The institution pointed out that both consumers and businesses have been transferring money digitally for years, whether it’s through bank accounts or online transactions. A potential central bank could offer a digital currency that could be used to continue this trend. It could also provide a safe, digital payment option for both households and businesses. Additionally, CBDC transactions could facilitate faster settlements between countries.

The digital US dollar may be a threat to privacy because the government will control the currency. It could also be detrimental to America’s financial stability, and it may not improve the existing methods of payment.

Powell suggested last year that the CBDC’s primary benefit could be to replace stablecoins and cryptocurrencies. However, Powell changed his mind and said that stablecoins and central bank digital currencies could co-exist earlier in the month.

The US CBDC won’t work for the Chinese CBDC

The Chair of the Federal Reserve stated that the USA should not copy the Chinese model for a digital currency central bank in April 2021. He said that the two economic superpowers require distinct approaches and are therefore very different.

“The currency being used in China does not work here. It allows the government to view every payment made in real-time.

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Marla Brooks

Marla Brooks – Financial Analysis My name is Marla Brooks, and I am the mainstream behind the”observednews.com”  for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.

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