- The US Federal Reserve is planning to unveil its research on a potential digital dollar in July.
- However, there are mixed feelings amongst banks and other financial institutions on the need for CBDC.
The United States is among the countries researching a potential central bank digital currency (CBDC), although there’s currently no approval for the launch of the would-be digital dollar. The Federal Reserve wants to remain on the frontier of CBDC research and policy development, and has since been jointly working on it.
According to a Bloomberg report on Monday, the Fed is planning to reveal its research on the digital dollar soon. However, some financial institutions are worried that such a form of payment can disrupt their operations.
Precisely in July, the officials at the Massachusetts Institute of Technology and the Federal Reserve Bank of Boston, plan to reveal its research so far, on the potential digital dollar. In collaboration with the Bank of Boston, the Massachusetts Institute of Technology has been developing prototypes for the CBDC platform. While this would serve as an early glimpse to the Fed work, some financial services companies are nervous about it.
Michael Del Grosso, an analyst at Compass Point Research & Trading LLC, said “Everyone is afraid that you could disrupt all the incumbent players with a whole new form of payment.”
A digital dollar may not completely replace the paper dollar, however, its use is likely to decline, thereby causing many financial companies to see it as a threat. Meanwhile, Visa and Mastercard are working on how to support a potential US CBDC on their payment platform.
A serious debate on the US CBDC
The new chairman of the Senate Banking Committee, Sherrod Brown, wants the Fed to accelerate its plans to launch a digital currency, as it will benefit Americans who can’t access financial services. However, senior vice president of payments at the American Bankers Association, Steve Kenneally, warned against this, saying:
“Rushing anything of this potential magnitude could introduce unintended consequences that threaten the stability of the banking system without contributing meaningfully to economic inclusion.”