The Federal Reserve announced Thursday that it is building and testing a hypothetical digital currency equivalent to cash.
The goal of the program is to improve the Fed’s understanding of digital currencies, Fed Governor Lael Brainard said in a speech at a conference on innovation sponsored by the Fed Federal Reserve regional bank.
Brainard went into great pain to stress that the central bank is not ready to issue digital dollars.
A “special policy process” involving sharp legal questions would be necessary if the Fed ever wanted to use a digital currency. The central bank has not made a decision to even start such a process, Brainard said.
“We are taking the time and effort to understand the important implications of central bank digital currencies and digital currencies across the globe,” Brainard said.
“Given the important role of the dollar” as a global reserve currency, it is essential that the Fed remain on the verge of researching and developing digital currency policies, Brainard said.
“There continues to be a strong demand for US currency and we remain committed to ensuring that the public has access to a range of payment options,” Brainard said.
Researchers at the Brookings Institution, in a letter last month, said a central bank digital currency “has progressed in recent years from a bold speculative concept to an apparent inevitability.”
In the wake of the coronavirus pandemic, prominent economists have noticed that a digital currency would have made it easier for the government to send incentive checks to workers.
Brainard noted that China has moved forward rapidly in its version of a central-digital bank currency.