Cleveland Federal Reserve President Loretta Mester said in a speech this week that a digital dollar could conceivably be a form of money transfer that would enable the Fed to disburse money to all individuals in America.
The Fed, of course, is hardly alone in mulling digital fiat currencies.. In May, 80 percent of 66 central banks queried by the Bank of International Settlements (BIS) said they were working on CBDCs. Notably, China’s central bank is already developing and testing a national digital currency in the Asian nation.
As for the Fed, there’s no concrete decision yet to adopt such a currency, Mester said. But in discussing the experience the Fed had in making emergency payments to individuals and families, she noted that digital dollars could be issued as liabilities for Fed banks to be used as emergency payouts.
“Other proposals would create a new payments instrument — digital cash — which would be just like the physical currency issued by central banks today, but in a digital form and potentially without the anonymity of physical currency,” Mester said. “Depending on how these currencies are designed, central banks could support them without the need for commercial bank involvement via direct issuance into the end users’ digital wallets combined with central-bank-facilitated transfer and redemption services.”