Nigeria took a bold step to become the first country to launch a CBDC in Africa. Following this advancement, numerous countries have increased their efforts to explore the CBDC area, and the United States is not far behind.
The Federal Reserve Board issued a discussion paper on Thursday that evaluates the benefits and drawbacks of a potential U.S. central bank digital currency, or CBDC.
It welcomes public participation and is the first stage in a dialogue about whether and how a CBDC could improve the domestic payments system’s safety and effectiveness. The document does not advocate for any particular policy outcome.
The Federal Reserve said in a long-awaited discussion paper that while creating an official digital version of the US dollar could speed up payments and give families a safe option as payments technology improves, it would also pose financial stability risks and privacy concerns.
Africa’s first digital currency, the eNaira has recorded over 34,000 transactions on the eNaira platform, amounting to over N188 million ($452,124.94) as of mid-December 2021.
Over 488,000 people have downloaded the consumer wallet and about 78,000 merchants from more than 160 countries have enrolled according to the CBN.
What the FED is saying
The report made no policy suggestions and provided no clear signal on the Fed’s position on launching a central bank digital currency, or CBDC. Furthermore, the Fed stated that it would not create one “without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
“While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides,” the Fed said.
The document, announced last year by Fed Chair, Jerome Powell, analyzes the payment landscape, including the rise of stablecoins and other cryptocurrencies. For a period of 120 days, comments on the problem will be accepted.
“The paper is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a U.S. CBDC,” it says.
Powell has stated that he would desire such a project to have widespread support and, ideally, to be the result of congressional action.