Cleveland Fed President Loretta Mester announced the proposals for the digital dollar project and the Fed’s response to these proposals. In his speech on September 23, Mester talked about the steps taken so far on the digital dollar and the Fed’s current policy.
Cleveland Fed President Mester announced that they started researching the concept of digital central bank money (CBDC) before the pandemic started. Mester mentioned that this research process accelerated with the pandemic and conveyed some digital dollar concepts that have been proposed so far. According to Mester’s statements, the following suggestions were made on how to use the digital dollar:
- The Fed can open a private account for each American citizen, and citizens can deposit digital dollars into this account,
- A digital dollar could be developed that could be used as digital cash, and it is generated directly by the Fed,
- The Fed can transfer this digital dollar directly to the end user, in other words, to the citizens’ digital wallet, without the need for any commercial bank brokerage.
No Final Decision Has Been Made Yet
It is known that the US Federal Reserve has been studying the digital dollar idea for a few months and has been working in this area. Cleveland Fed President Mester made statements confirming this process in his speech yesterday. Mester said the Fed is continuing to measure and weigh the digital dollar idea.
Mester said that the concept of digital central bank money is not fully understood yet, and emphasized that these uncertainties should also be eliminated. Saying that it is not known exactly what advantages the idea of the digital dollar will provide, the Fed Chairman reminded that the central bank is currently under investigation.
Announced Who They Worked With
During the speech, Mester also explained to whom the Fed received support during its research on the digital dollar. It was known that the Fed collaborated with the Massachusetts Institute of Technology (MIT) on this issue. Mester said that this union between the Boston Fed and MIT has been going on for years.
Software developers within the Fed also contribute to the work on the digital dollar. However, according to Mester’s statements, the New York Fed is also working with different organizations such as the Bank for International Settlements in this process. Fed President made the following reminder about all these deals and collaborations for the digital dollar:
“We have to do such studies to evaluate the idea of digital central bank money. However, these studies do not mean that the Fed will issue its own digital currency. Before reaching this stage, how digital currencies will affect financial stability, market integrity, personal security and privacy, and monetary policies should be examined.