While the Federal Reserve has made no decisions on whether to pursue or implement a central bank digital currency, or CBDC, we have been exploring the potential benefits and risks of CBDCs from a variety of angles, including through technological research and experimentation. Our key focus is on whether and how a CBDC could improve on an already safe and efficient U.S. domestic payments system.
CBDC is generally defined as a digital liability of a central bank that is widely available to the general public. Today in the United States, Federal Reserve notes (i.e., physical currency) are the only type of central bank money available to the general public. Like existing forms of money, a CBDC would enable the general public to make digital payments. As a liability of the Federal Reserve, however, a CBDC would be the safest digital asset available to the general public, with no associated credit or liquidity risk.
The Federal Reserve Board has issued a discussion paper that examines the pros and cons of a potential U.S. CBDC. As part of this process, we sought public feedback on a range of topics related to CBDC. The Federal Reserve is committed to hearing a wide range of voices on these topics.
Last Update: April 20, 2023
FAQs
A central bank digital currency (CBDC) is a form of digital currency issued by a country's central bank. It is similar to cryptocurrencies, except that its value is fixed by the central bank and is equivalent to the country's fiat currency. Many countries are developing CBDCs, and some have even implemented them.
Will CBDC replace cash? ›
2. Will a U.S. CBDC replace cash or paper currency? The Federal Reserve is committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them.
Is America going to digital currency? ›
Critics say there are massive privacy and security issues and an electronic currency could give the US government unprecedented control over transactions. Federal Reserve Chair Jerome Powell said in March the possibility of launching a digital dollar in the US was slim to none.
Will cash become obsolete? ›
If it's been a long time since you pulled out actual dollars and coins to pay for something — here's a conversation for you. It might seem like cash is slowly becoming obsolete. But, Brett Scott says it's a false narrative that we're all pining for a cashless society.
Which country has digital currency? ›
19 of the Group of 20 (G20) countries are now in the advanced stages of CBDC development. Of those, eleven countries are already in the pilot stage. This includes Brazil, Japan, India, Australia, South Korea, South Africa, Russia, and Turkey. 3 countries have fully launched a CBDC—the Bahamas, Jamaica and Nigeria.
What does a digital dollar mean? ›
Digital money is any means of payment that exists in a purely electronic form. Digital money is not physically tangible, like a dollar bill or a coin. It is accounted for and transferred using online systems. Digital money generally represents fiat currencies, such as dollars or euros.
Should we get rid of cash? ›
For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase. In short, getting rid of cash would impose hardships on society's most vulnerable people and could jeopardize our privacy.
What happens if the U.S. goes to digital dollar? ›
A U.S. CBDC could affect the financial structure of the U.S. and alter the duties and responsibilities of the private sector and the central bank. The safety and stability of the financial system could be compromised during the conversion process from another form of money to a CBDC.
What will replace the dollar? ›
But that begs a critical question: What would replace the dollar? Some say it will be the euro; others, perhaps the Japanese yen or China's renminbi. And some call for a new world reserve currency, possibly based on the IMF's Special Drawing Right or SDR, a reserve asset.
Is the United States going to a cashless society? ›
Progress of cashless initiatives in key countries
The US is moving toward cashless payments, with a substantial increase in the use of mobile wallet apps and contactless cards. A report from the Federal Reserve Bank of San Francisco found that payments made using cash accounted for just 18% of all US payments in 2022.
Norways is the most cashless country, with only around 2% of payments being made by cash, and 100% of the population having a bank account.
What year will there be no cash? ›
She estimates that Australia will enter into a cashless society by 2030, slightly later than Commonwealth Bank's prediction of 2026, and argues for government regulation of digital payment services to help navigate the transition.
What is the difference between CBDC and digital dollar? ›
It is easy to confuse a CBDC and cryptocurrency but they aren't the same. A U.S. CBDC will be centralized and under the purview of the Federal Reserve, the U.S. central bank. Cryptocurrency is decentralized and gives users more control.
What is an example of digital currency? ›
Cryptocurrencies are digital currencies that use cryptography to secure and verify transactions in a network. 1 Cryptography is also used to manage and control the creation of such currencies. Bitcoin and Ethereum are examples of cryptocurrencies.
What is the difference between central bank and digital currency? ›
The central bank and Commercial bank are the important financial institutions of a country. The central bank is an institution that is responsible for the monetary policies of the country while the commercial bank provides banking and other financial services to the general public.
What is an example of a CBDC? ›
Examples include the Sand Dollar by the the Central Bank of the Bahamas, the Naira in Nigeria, the Digital Rupee launched by the Reserve bank of India, and the Digital Ruble by the Bank of Russia.
