Federal Reserve digital currency

A Federal Reserve digital currency, commonly discussed as a U.S. central bank digital currency (CBDC) or "digital dollar," would be a liability of the Federal Reserve issued in digital form to the general public or to financial intermediaries, rather than as physical cash or commercial bank deposits. Unlike cryptocurrencies such as Bitcoin, a Fed-issued digital dollar would be centrally issued, denominated in U.S. dollars, and backed by the full faith and credit of the United States.

In January 2022, the Federal Reserve Board published a discussion paper titled Money and Payments: The U.S. Dollar in the Age of Digital Transformation, which examined potential benefits (faster payments, financial inclusion, preserving the dollar's international role) and risks (disintermediation of commercial banks, privacy concerns, cybersecurity, monetary policy transmission). The paper explicitly stated the Fed would not proceed without clear support from the executive branch and Congress.

Two main design models are typically discussed:

• Wholesale CBDC — restricted to banks and financial institutions for interbank settlement.
• Retail CBDC — accessible to households and businesses for everyday payments, usually via intermediated wallets rather than direct Fed accounts.

Research efforts include Project Hamilton, a joint technical study by the Federal Reserve Bank of Boston and MIT's Digital Currency Initiative, which released its Phase 1 report in February 2022 demonstrating a high-throughput transaction processor.

Politically, the topic is contested. Executive Order 14067, signed by President Biden in March 2022, directed agencies to study digital assets including a possible CBDC. Critics in Congress, including legislation introduced by Representative Tom Emmer, have raised concerns about financial surveillance and have sought to restrict the Fed from issuing a retail CBDC directly to individuals. As of the most recent Fed statements, no decision has been made to issue a digital dollar, and Chair Jerome Powell has emphasized that congressional authorization would be required.