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US Federal Reserve to publish research paper as it digs deeper into CBDC

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The U.S. Federal Reserve is digging deeper into the feasibility of a central bank digital currency (CBDC). In its latest statement, the Fed has confirmed that it’s publishing a discussion paper in the summer exploring the implications of the CBDC on the payments landscape. The announcement comes at a time when China has continued advancing its digital yuan which, according to an expert, will be one of the biggest threats to the West.

In a video statement, Federal Reserve Chair Jerome Powell acknowledged that the central bank has been keeping up with developments that are changing the payments sector. One of the standouts has been the central bank digital currency. The Fed has taken a keen interest in this field, he revealed. Its key focus has been on how a CBDC can improve the payments system in the United States.

He remarked, “We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks.”

Powell believes that a CBDC would raise important questions on how it would affect financial stability, monetary policy, consumer protection and privacy considerations. This will require “careful thought and analysis—including input from the public and elected officials.”

Powell’s biggest revelation was that the Fed will be publishing a discussion paper this summer that will explore the implications of the evolving technology in payments. This paper will have a special focus on CBDCs, and will complement Federal Reserve System research that is already underway, according to the Federal Reserve official.

The latest move by the U.S. is in line with ensuring it keeps up with China, Derek Tang believes. Tang, an economist at LH Meyer/Monetary Policy Analytics in Washington told Bloomberg, “It is hard not to view today’s statement in the context of China and what is happening in the private crypto markets. There is a little bit of complacency at the Fed saying, ‘We are the reserve currency.’ That is shifting now.”

As the U.S. continues to take measured steps in its CBDC journey, its biggest economic rival China is taking huge leaps. China has been developing its CBDC for over five years now and looks set to launch it next year. Payment processors, tech giants and banks are already on board the digital yuan train. Hundreds of thousands of people have also had the chance to transact in the CBDC in limited trials.

According to one financial expert, the digital yuan will be the biggest threat to the West in the past four decades. Kyle Bass, the chief investment officer at Texas-based Hayman Capital Management believes that the Chinese government will force the adoption of the digital yuan for trade and investment in China.

He commented, “And I believe the digital yuan is the largest threat to the West that we’ve faced in the last 30-40 years, and it’s because it allows China to actually get their claws into everyone in the West and allows them to potentially export their digital authoritarianism.”

See also: CoinGeek Live panel, The Future of Banking, Financial Products & Blockchain

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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