On January 21, the Federal Reserve released the central bank’s digital currency white paper “Money and Payments: The U.S. Dollar in the Era of Digital Transformation” on Thursday afternoon Eastern Time.

In a press release, the Fed noted that as a discussion paper, it “examined the pros and cons of a potential U.S. central bank digital currency (CBDC).”

The Fed believes that the current financial system may be underpinned by the creation of a central bank digital currency (CBDC), but such a currency can only operate within the current private banking network, not a CBDC issued by the Fed directly to consumers.

The Fed did not commit to creating a digital dollar in its white paper, but explained what it would need to focus on when dealing with the issue, and sought public comment (for 120 days) on issues such as privacy, financial stability, and how the digital dollar could be used.

The white paper mentions that, without explicit support from the executive branch and Congress, it does not intend to continue issuing central bank digital currency, and the most ideal form is to have specific authorization laws; central bank digital currency will complement rather than replace existing digital payment methods. Additionally, cybersecurity, financial crime prevention, and meeting future needs are all factors that the Fed must consider before issuing a CBDC.

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