US Fed economists explore the “intrinsic” value drivers of CBDCs

A new analysis published on Monday reveals the US Federal Reserve has extended its digital currency (CBDC) study. The research is focused on the possible effect of a digital dollar on commercial banking and currency policy in a study entitled "Centralized Bank for Digital Currency: A Literature Review”. It was conducted by Fed economists Francesca Carapella and Jean Flemming. The analysis offers a theoretical basis for understanding the impact of CBDCs on customer acceptance and financial stability.

Via literature review, the authors make an assessment on a specific subject that justifies the need for further study. As one of the most critical issues for research to address: the Fed's study described the "intrinsic features of CBDCs”.

According to the authors,

“As with any new literature, many questions remain. We believe the most crucial question is which intrinsic features of CBDC as a means of payment and a store of value are important for households' portfolio choices as to which monies to use.”

The role of CBDCs in comparison with other payment methods, according to the Fed’s original research paper released in August, would facilitate the cash and real-time gross settlement services, rather than entirely replicate normal payment modes. The Fed is taking time on digital dollar adoption as Jerome Powell the Fed Chairman said it was impossible to be introduced at any given time since there is already a, “safe and active dynamic domestic payment system” in the US.

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