The Federal Reserve is considering whether to adopt a digital version of the dollar, one better suited to a world where we are already using Venmo and Apple Pay. Here's what to know.
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Last month, the Federal Reserve released a much-anticipated paper, laying out the advantages and disadvantages of a digital currency.
The Fed says it's a first step, meant to kickstart an important conversation among policymakers and to gather feedback, from average people to some of the country's largest financial institutions.
Cybersecurity is another critical issue, especially given the uptick in hacks and heists at cryptocurrency exchanges for example.
To implement a digital dollar, the U.S. government would need to modernize the country's financial infrastructure to stave off attacks.
Another argument for creating a digital dollar is to open up digital transactions to Americans who don't have bank accounts. According to the Fed,
more than 5% of U.S. households are "unbanked."
Providing them with a digital wallet would allow people to participate in our increasingly cashless financial system.
It would also make it easier for the federal government to distribute benefits to poorer Americans.
So what's next?
Fed Chair Jerome Powell and his colleagues are moving ahead cautiously and methodically.
The Federal Reserve Bank of Boston is also expected to release the results of its research into the technological challenges associated with implementing a CBDC in the U.S.
It would take five-to-ten years to introduce a digital currency in the U.S., several experts say, but they argue policymakers can't sit idly by.
