U.S. Central Bank Digital Currency: Benefits and Challenges to Policy Implementation

Abstract

The next technological disruption in the banking and financial services sector involves the introduction of a central bank digital currency - or a CBDC. What is a CBDC? In the U.S., a CDBC is defined as a digital liability of the U.S. Federal Reserve System that is widely available to the general public. In this article, the benefits of instituting a CBDC in the U.S. will be assessed, followed by the public and private sector challenges of such technology adoption identified and discussed along economic, political, privacy, and security parameters. The final section of the article develops the research agenda, i.e., the questions that need to be addressed in the development of a potential policy framework, charged with ensuring that, if a CBDC is adopted by the U.S. Federal Reserve, there will be an effective public regulation regime implemented that effectively addresses the identified economic, political, privacy, and security concerns.