The Fed has paved the way for the digital dollar – the pros and cons, what awaits its release

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The US Federal Reserve has taken a key step towards the possible issuance of an official US digital currency, a move that could dramatically change the landscape of the US financial system, according to Bloomberg.

The Fed has released a 35-page report on the issue of a US-backed digital currency, without reaching a final decision, noting that the issuance of the CBDC (central bank digital currency) would only proceed with the support of the White House and Congress.

“The introduction of the CBDC would represent an extremely important innovation for the world of American money,” the report said.

The Fed, which will receive comments and comments by May 20 on the content of the report, says it would prefer U.S. lawmakers and senators to pass legislation that would allow the digital currency to be issued before it can issue it. Its main advantage would be that it would ensure that the dollar would remain the dominant currency in international financial activity. The Fed also notes that the CBDC could improve cross-border payments, expand financial inclusion in society, and immerse the dollar in new technology.

According to the US Federal Reserve, there is a possible negative impact of such a move, including the possibility that customer accounts in traditional banks will “dry up” and the crises that will break out in financial companies will become more serious and more frequent.

There is also concern about the protection of private data, with the state having a complete picture of the transactions of ordinary citizens. There are not many references in the report to how this issue can be resolved, with the Fed simply noting that a balance will be needed between protecting individual consumer rights and transparency in order to prevent criminal activity.

The infrastructure of this system may also become a target for cybercriminals – hackers. CBDC shielding would be “extremely difficult”, as the new currency would have “many more gateways than existing payment systems”.

A Federal Reserve official, in a teleconference with reporters, did not specify the schedule of moves that will follow after the consultation, nor possible release dates of the new digital currency.

Source From: Capital

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