Federal Reserve Bank of Cleveland is exploring the possibility of creating a digital dollar. According to the institution’s President Loretta Mester, the idea of establishing a central bank digital currencies (CBDC) has been in the officing before the coronavirus pandemic.
A statement by the bank indicates that no solid decision has materialized. However, Mester noted that the Board of Governors has been conducting research on the benefits and risks of a digital dollar. According to Mester:
“A range of potential risks and policy issues surrounding central bank digital currency need to be better understood, and the costs and benefits evaluated,”
She made the revelation during a keynote speech at the Chicago Payments Symposium.
Mester stated that there are ongoing initiatives like a multi-year partnership between the Massachusetts Institute of Technology (MIT) and the Boston Fed. Additionally, there is an existing collaboration between the New York Fed Branch and the Bank for International Settlements.
US cash demand remains high
Despite the possibility of a digital dollar, Mester affirmed that the demand for cash within the United States remains high. The possibility of a digital dollar will play a key role within the payment sector.
Mester added that the Covid-19 pandemic has caused significant disruption to sectors like payments leading to changes to the patterns and volume of domestic transfers. She noted that it is vital to make key investments to ensure the country’s payments system remains resilient.
At the same time, Mester announced a new law proposal where every American will have an account at the Fed for depositing digital dollars as liabilities.