Update on Future Digital Dollars and CBDCs

A Hypothetical CBDC Could Improve Financial Stability – Finds U.S. Treasury

One of the big conversations in the world of crypto are CBDCs, a central bank digital currency. That's fancy jargon for the simple question, will we ever have a digital dollar? Will the Federal Reserve allow money to be digital as opposed to merely being printed on paper that you carry around in your pocket or purse? 

Well, a CBDC, a central bank digital currency is under development right now by the Federal Reserve, along with the federal central banks of just about every country in the world. Widely projected that by the end of this decade, every country is going to have a digital version of its currency.

One of the big questions here in the U.S. that federal regulators are trying to answer is this, will a digital dollar improve our nation's financial stability, or will it hurt it?

Well, now there's a new paper from the Office of Financial Research that's a part of the Treasury Department. They've created a model simulating a bank run, one that occurs with the existence of a digital dollar and one that occurs without digital dollars. The result, according to their study, a CBDC, a central bank digital currency, helps improve financial stability. The reasons, according to the researchers at the Treasury Department, having the existence of a CBDC reduces the amount of deposits in banks because it gives depositors another option of storing their money elsewhere. You could store your digital dollars and a digital wallet outside of a bank. And this gives policymakers real time banking data on withdrawals, helping them make decisions to provide greater stability for the economy.

It's further evidence that a CBDC is going to be in our future, and you will one day have digital dollars as easily as you now have paper ones.