With the publishing of a highly anticipated report on US central bank digital currency (CDBC) last Thursday, CDBC’s will likely get more media coverage. A CBDC would serve as a purely digital version of cash that’s backed by the Fed and just as available to the public as physical cash. This recent article describes both the pros and cons of a CDBC. One big pro is that a CBDC could bring safe, fast, and accessible payments. An example of a con is:
Allowing the Fed to back digital payments could “fundamentally change the structure of the US financial system,” according to the report. Commercial banks rely on deposits to dole out loans, but a CBDC could replace cash held in commercial banks with digital wallets offered by the private sector. That could make it far more difficult for people to take out loans.Ben Winck – A fully digital US dollar would be a better online currency than crypto, new Fed report suggests
As the economy is increasingly a critical area of convergence, those looking to the future should pay close attention to the progression of CDBCs. This video looks at them through the lens of China’s new digital currency.