The FRB also discussed the potential risks and policy issues implicated by a U.S. CBDC. First, changes to the financial sector market structure—the substitution of a CBDC for commercial bank money—ultimately could reduce credit availability or increase credit costs. However, CBDC design choices, such as creating a non-interest-bearing U.S. CBDC or limiting the amount that an end user can hold, could alleviate some of these concerns. Further, there is concern for the safety and stability of the financial system. Because a U.S. CBDC would be the safest form of digital money available, runs on financial firms may be more likely during times of stress. Nonetheless, the FRB noted that the same design choices described above could alleviate this problem as well. Third, the efficacy of monetary policy implementation and interest rate control by the FRB could be impacted as a result of changes to the supply of reserves in the banking system. Moreover, the potential for substantial foreign demand could further complicate monetary policy implementation. The FRB also addressed concerns with privacy, data protection, and the prevention of financial crime. Ensuring that a U.S. CBDC has appropriate defenses against operational disruptions and cybersecurity risks could be particularly difficult because a CBDC network could have more entry points than existing payment services. However, providing for offline capability of the CBDC, if feasible, could enhance operational resilience of the digital payment system.

In June 2022, U.S. Rep. Jim Himes (D-CT, 4th District) published a white paper making the case for a U.S. CBDC. Himes believes a U.S. CBDC will keep U.S. currency and payment systems innovative and competitive and that the potential benefits meaningfully outweigh the risks. Rep. Himes commented and elaborated on many of the issues raised in the FRB’s CBDC paper, including the choice between a wholesale or retail CBDC, architectural decisions (he advocated for using a permissioned semi‑distributed system), account-based wallets, and non-bank participants. More importantly, he explicitly called for Congress to “begin the process of dialogue, education and debate that will lead to draft legislation to authorize further studies, pilot projects, and the possible creation of a U.S.‐issued CBDC.”

FRB Vice Chair Lael Brainard recently made conceptually similar points. Specifically, in a July 8, 2022, speech, she stated that “[a] digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system” and that the development of a U.S. CBDC could be a “natural evolution” in payments.

To summarize, the FRB’s paper has brought the discussion of a potential U.S. CBDC to the forefront. While it remains unclear what a U.S. CBDC may look like or when it could be created, the discussion is moving forward, as illustrated by Rep. Himes’s whitepaper and Vice Chair Brainard’s recent remarks.