While a growing number of nations are issuing or considering Central Bank Digital Currencies (CBDCs), the recently enacted 21st Century ROAD to Housing Act prohibits the Federal Reserve from issuing a “publicly available” CBDC until at least 2031. In a new primer, policy fellow Oren Swagel discusses CBDCs and their potential benefits and risks.

Key points:

• The Fed has indicated that even after the ROAD to Housing ban sunsets, it will not issue a retail CBDC – a digital analog to cash – without congressional authorization.
• Although a retail CBDC’s precise policy implications would depend on its final design, advocates argue that retail CBDCs could increase financial inclusion, strengthen the international role of the U.S. dollar, enhance cross-border payments, improve monetary policy, and spur innovation in payments technology, among other benefits; those opposed contend that a CBDC could violate financial privacy, threaten financial stability, reduce the availability of credit, deter innovation, weaken the efficacy of monetary policy, and more.
• Both the importance of digital finance and questions about the international role of the U.S. dollar are likely to increase in the future – in part due to China’s ongoing development of a cross-border CBDC payment platform; as such, policymakers should continue to monitor developments in this evolving landscape.

Read the analysis.