The Federal Reserve is looking at a broad range of issues around digital payments and currencies, including policy, design and legal considerations around potentially issuing its own digital currency.
Furthermore, the US governor’s remarks suggest more openness to the possibility of a Fed-issued digital coin than in the past, according to Reuters. Still, even if digitalisation has the potential to deliver greater value and convenience at lower cost, financial authorities worry about the rise of private digital payment systems and currencies, including Facebook’s Libra digital currency project.
As some of the new players are outside the financial system’s regulatory guardrails, their new currencies could pose challenges in areas such as illicit finance, privacy, financial stability, and monetary policy transmission.
The Fed is developing its own round-the-clock real-time payments and settlement service and is currently reviewing 200 comment letters submitted in 2019 about the proposed service’s design and scope. Dozens of central banks globally are also doing such work, a recent international study showed, with China moving ahead on plans to issue a digital coin.
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