The US Central Bank, Federal Reserve (Fed), published a 40-page study highlighting positives and negatives of implementing its CBDC, the digital dollar. Despite this, he made no decision on the matter.
CBDCs, an acronym for central bank digital currencies, still divide opinions due to some points such as data privacy. Other countries like China don’t care so much about it, not even their citizens, after all, the digital yuan wallet is the most downloaded app in the country.
In comparison with Bitcoin, as a payment system, the text cites the severe limit of transactions per second, as well as the energy expenditure necessary to keep the network secure.
Benefits of the Digital Dollar, According to the Fed
Among the points cited as positive, the Fed begins the chapter showing the need to update itself. As an example, he cites cryptocurrencies and stablecoins, two products that are in increasing demand.
The second benefit would be the improvement between cross-border payments. This is also another feature of Bitcoin, which has offered cheaper services than Western Union since its birth.
Other improvements to a CBDC, according to the Fed, include financial inclusion, yet another feature of cryptocurrencies. As well as public access to Central Bank reserves.
Finally, the document highlights the strength that the US dollar can gain if it goes digital. That is, facilitating the purchase of your currency by foreigners and thus increasing its value.
Digital Dollar Risks, According to the Fed
Regarding risks, the report points to the security and stability of the financial system, citing a possible insufficiency of related liquidity generated by mass withdrawals, in commercial banks, to convert these dollars into CBDC.
The effectiveness of monetary policy implementation is another negative point, says the Fed citing a possible volatility of its digital dollar as, due to the points mentioned above, its demand can expand and fall rapidly.
In addition, the report also cites the government’s concern about the privacy of its users, an issue already raised by US Congressman Tom Emmer.
Finally, the report cites cybersecurity-related issues, requiring your system to have an extremely resilient infrastructure. As well as mentioning the use of its currency by criminals, stating that it would be necessary for institutions to follow strict rules.
no defined position
After analyzing the benefits and risks, the US government now has to choose which path to take. On the one hand, it could lose market share to China, whose currency is already being used as an international reserve by other countries since 2016.
On the other side of the coin, the US government will have to sacrifice something in order to implement the digital dollar. However, despite their interest, it seems they are not in as much of a hurry as China.
Bitcoin, on the other hand, remains stable at around US$42,000 even after positive news such as the possible entry of Google and Intel into the market, as well as being disinterested in the words of the Central Bank of Russia that it wants to ban both mining and the use of cryptocurrencies. cryptocurrencies.