The Fed announced Thursday that it will publish a research paper this summer that outlines its approach to implementing a central bank digital currency (CBDC) called FedNow. The initial launch is expected in 2023.
The U.S. central bank, which has been studying digital payment systems for several years, said it will release a research paper this summer that is the first step towards its goal of a digital dollar called FedNow.
The Fed has long been considering the idea of introducing a central bank digital currency (CBDC), and with the arrival of the new US President Joe Biden and the new government, these efforts have accelerated. Market analysts note that the idea has become more actively discussed and studied by the central banks of the countries during the COVID-19 pandemic, which hastened the transition of the population to a non-cash form of payment.
Officials, in turn, note that the availability of digital currency along with paper currency would make it easier to implement direct payments of assistance to the population affected by the pandemic, since not everyone has access to bank accounts and payment systems.
At the same time, there is growing concern in the Fed about the risks of cryptocurrencies, which boomed in 2020 and which are not regulated by laws and government agencies.
By issuing its own digital currency, the Fed will be able to offer an alternative backed by the value of fiat currency.
For a long time, the US authorities did not regulate the cryptocurrency market, which has grown strongly over the past 1.5 years, simply warning the population about the risks of such investments.
On Thursday, the Treasury Department officially announced it was taking steps to tackle crypto markets and transactions, saying it would require tax reports on any transfer of $ 10,000 or more.
“Cryptocurrency is already a serious detection problem as it promotes illegal activities in general, including tax evasion,” the Finance Ministry said in a statement.
The move comes as part of the Biden administration’s plans to replenish the country’s budget through tougher measures to prevent tax evasion in the face of deficits and large infrastructure plans that require large injections.
The Treasury Department estimates that improved tax collection will raise $ 700 billion over the next decade.
As for the central bank digital currency (CBDC) called FedNow, analysts point out that efforts to implement it are taking place as the United States seeks to overtake China.
China’s progress raises concerns among some that the digital yuan could undermine the dollar’s position as the world’s reserve currency. In China, there is a pilot project for the introduction of digital currency in a limited area – in the country, about 85% of transactions are already happening online.
At the same time, according to Chairman Jerome Powell, the Fed does not strive to implement CBDC quickly, but focuses on a “thoughtful” process, assessing all the risks and opportunities of participants in these processes, and not participating in a race with global counterparts.
“We are focused on providing a secure and efficient payment system that provides broad benefits to American families and businesses, and supports innovation,” Powell said.
“The efficient functioning of our economy requires people to believe and trust not only the dollar, but also the payment networks, banks and other payment service providers that allow money to flow on a daily basis.”
David Treat, head of blockchain practice at Accenture, who leads the public-private research initiative on CBDC, believes it will take 4-5 years for FedNow to be widely deployed “to ensure its implementation is aligned with the social values and laws of each country.”
The Fed is working on the project with various groups, including the Bank for International Settlements. The Boston Fed took the lead in implementing the project.
Marketinfo.pro wrote about which countries have already switched to digital currency, the pros and cons of CBDC implementation, as well as the concerns of the largest US banks in the article “Wall Street sees risks in the idea of the CBDC digital currency of central banks”.