U.S. Central Bank Digital Currency: Pros and Cons Analysis
The Federal Reserve has recently released a report analyzing the pros and cons of a potential U.S. Central Bank Digital Currency. The report states that a safe and regulated centralized digital currency could provide liquidity to households and businesses. Further, a centralized currency would give entrepreneurs a platform on which to create new financial products and services, support faster and cheaper payments (including cross-border payments), and expand consumer access to the financial system.
Of course, a CBDC would also add additional risks, including altering the safety and stability of the market structure, the availability of credit, and the efficacy of monetary policy.
Jon-Jorge Aras, Partner, and Chair of Securities Litigation states, “The Federal Reserve report raises the likelihood that the U.S. will create its own digital currency. The widespread use of cryptocurrency has signaled to policymakers in D.C. that more and more transactions will become entirely digital and based on fiat. A U.S. digital currency could have a substantial impact on the global economy, as well as disrupt the rapidly blossoming crypto markets.”
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