The US Federal Reserve expanded its research on central bank digital currencies, or CBDCs, in a new survey posted on its website on Monday.

In a report titled Central Banks’ Digital Currency: A Literary Survey, Fed economists Francesca Carabella and Jean Fleming put together studies examining the potential impact of the digital dollar on commercial banking and monetary policy. The review provides a theoretical framework for understanding how central bank digital currencies affect consumer acceptance and economic stability.

The authors write:

“From a theoretical perspective, the introduction of a central bank digital currency (CBDC) raises longstanding issues related to the provision of public and private funds […] and the ability of the central bank to use central bank digital currency as a vehicle to guide household monetary policy.”
A literature review is mainly an environmental study of a specific topic and is used to justify the need for further research. The Federal Reserve’s report identifies “essential properties of CBD” as the most important research issue requiring further development:

“As with all new literature, many questions remain. We believe the most important question is what are the key features of central bank digital currencies as a means of payment and a store of value, which is important for choosing a household portfolio when it comes to money to spend. ”

On August 13, the Federal Reserve released an original research paper comparing central bank currencies with other payment methods. Authors Paul Wong and Jesse Lee Maniff concluded that CBDC “can never replicate all cash and gross settlement services” in real time, but it could improve both payment methods.

Despite the Fed describing central bank digital currencies as a central bank’s “arms race” for a decade, the Fed has been slow to move to the so-called digital dollar. Fed Chairman Jerome Powell said last month that a central bank digital currency is unlikely to ever be introduced because the United States already has a “secure and dynamic internal payment system.”

Powell stressed that addressing privacy and security risks is more important than gaining first-time advantage in this area.

Meanwhile, China is taking a more proactive approach to launching its digital currency. Last month, the People’s Bank of China completed its largest digital yuan pilot by distributing online wallets to 50,000 randomly selected consumers.

Source: CoinTelegraph