Board of Governors of the Federal Reserve System

Technological advances are driving rapid change in the global payments landscape. The Federal Reserve is studying these developments and exploring ways that it might refine its role as a core payment services provider and as the issuing authority for U.S. currency.

"As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system," Federal Reserve Board Chair Jerome H. Powell said Thursday in a video message. "In pursuit of these core functions we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking."

This technology also offers new possibilities to central banks—including the Fed. In particular, it enables the development and issuance of central bank digital currencies, or CBDCs. A CBDC is a new type of central bank liability issued in digital form. While various structures and technologies might be used, a CBDC could be designed for use by the general public.

As the Federal Reserve explores the potential benefits and risks of CBDCs, the key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S. domestic payments system in its ability to serve the needs of households and businesses. "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 said. "The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials."

Powell announced that the Federal Reserve plans to publish this summer a discussion paper that will explore the implications of fast-evolving technology for digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency. The paper will complement Federal Reserve System research that is already underway.

The Federal Reserve System is focused on better understanding the full set of opportunities and risks associated with new digital payment mechanisms. More technically oriented projects, focused on specific tools and infrastructure, are underway at the Board and the Federal Reserve Bank of Boston. The Fed is also collaborating internationally in groups such as the Bank for International Settlements' CBDC coalition.

A video message from Chair Powell on payment innovation can be viewed at: www.federalreserve.gov.

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