Digital Dollars: Critical Design Choices and Effects of a Central Bank Digital Currency

With interest in central bank digital currencies (CBDCs) surging, policymakers and agency officials are facing increased pressure to design and implement one for the central bank of the United States, the Federal Reserve. But the seemingly simple question of whether the Fed should issue a CBDC masks complex technological, financial, geopolitical, and privacy issues. To be sure, America’s financial and payments systems need significant improvement—particularly to enhance transfer speed at lower cost and to include more Americans in the banking and financial systems—but current interest in CBDCs is driven more by a fascination with new technology than anything specific that can be accomplished through their use.