How could a Federal Reserve digital currency work?

The Federal Reserve is in the process of deciding whether or not to create a digital currency. At present, he is studying the risks and the benefits. He is expected to publish a report as early as this month.

A central bank digital currency would be just a digital version of the dollar, issued and managed directly by the Fed. At last month’s press conference, Fed Chairman Jerome Powell said the ultimate test for a digital dollar will be “whether the clear and tangible benefits outweigh the costs and risks.”

A digital dollar could make transferring money cheaper and faster. And people without access to a regular bank account could get one from the Fed, said Danielle DiMartino Booth, former Dallas Fed adviser.

“They would have, if you will, a checking account over there at the Federal Reserve,” she said.

DiMartino Booth said it would make it easier for the government to distribute federal aid.

There is a flip side, said Richard Levin, president of the Fintech and Regulatory Practice at law firm Nelson Mullins: The Fed would know a lot about you.

“They would know exactly where you spent every digital dollar,” he said.

Levin says it would be best for consumers to keep digital dollars in traditional commercial banks that are required to protect your data.

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