U.S. Department of the Treasury Report
September 2022
The Future of Money
and Payments
Report Pursuant to Section 4(b) of
Executive Order 14067
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Table of Contents
I. Introduction ....................................................................................................... 1
II. Money and payments ......................................................................................... 3
Money, payments, and the current payment system .................................................. 3
Consumers and payments today ............................................................................... 11
Recent innovations in money and payments ............................................................ 14
III. Potential U.S. CBDC design choices ................................................................... 19
Money .......................................................................................................................... 19
Payment system .......................................................................................................... 20
Intermediaries ............................................................................................................. 22
AML/CFT controls and CBDC ...................................................................................... 25
U.S. international engagement on digital assets ...................................................... 28
IV. Policy considerations ....................................................................................... 30
Consideration 1: Building the future of money and payments ................................ 30
Consideration 2: Supporting U.S. global nancial leadership ................................. 34
Consideration 3: Advancing nancial inclusion and equity ..................................... 37
Consideration 4: Minimizing risks ............................................................................. 40
V. Recommendations ........................................................................................... 46
Recommendation 1: Advance work on a possible U.S. CBDC, in
case one is determined to be in the national interest. .............................................. 46
Recommendation 2: Encourage use of instant payment systems
to support a more competitive, eicient, and inclusive U.S. payment landscape. . 47
Recommendation 3: Establish a federal framework for payments
regulation to protect users and the nancial system, while
supporting responsible innovations in payments. ................................................... 48
Recommendation 4: Prioritize eorts to improve cross-border payments. ........... 49
VI. Appendix: Policy objectives .............................................................................. 51
The Future of Money and Payments
i
ii
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I. Introduction
On March 9, 2022, President Biden signed an Executive Order on Ensuring Responsible
Development of Digital Assets (Executive Order).
1
Section 4(b) of the Executive Order directs
the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney
General, the Secretary of Commerce, the Secretary of Homeland Security, the Director of
of other relevant agencies, to submit to the President a report on the future of money and
payment systems.
This report reviews the current U.S. system of money and payments, including developments
Central Bank Digital Currency (CBDC) in the context of public policy considerations related
Money serves three core functions: a unit of account, a medium of exchange, and a store of
liability of a private intermediary. Payment systems transfer money. Consumers and
businesses use retail payment systems for transactions that typically involve smaller dollar
-
ally involve larger dollar amounts.
bank money tends to underpin interbank payments and serve as the backbone of the
broader payment system.
2
balances, operates payment systems, and supervises certain intermediaries that issue private
money and make payments. Even as the money and payment system evolves, the central
and other public interests.
The current U.S. system of money and payments has substantial strengths. The system has
-
of the payment system enjoy privacy protections. On the other hand, certain legacy payment
2 See generally
.
The Future of Money and Payments
Introduction
1
by existing systems, indicating there remain substantial opportunities to promote broader
Recent innovations in money and payments, including instant payment systems and stable-
and potentially more inclusive ways to pay. Stablecoins aspire to be a new type of money
supported by a novel payments technology, with implications for the payment system that
Against this backdrop, this report makes recommendations designed to improve the U.S.
system of money and payments so that it best achieves a range of policy goals. The recom-
mendations are for the U.S. government to:
• Recommendation 1: Advance work on a possible U.S. CBDC, in case one is deter-
mined to be in the national interest.
• Recommendation 2: Encourage use of instant payment systems to support a more
• Recommendation 3: Establish a federal framework for payments regulation to
payments.
• Recommendation 4:
Seeinfra-
cial services in the United States, including that the percentage of those who are unbanked in the United States is
Introduction
2
II. Money and payments
Money, payments, and the current payment system
Money
Money serves three core functions.
4
means that it can be used to price goods and services. Second, money must serve as a
medium of exchange in commerce to buy and sell goods and services. Third, money must
serve as a store of value. That means the value of money is generally preserved over time.
Money comes in two forms: public and private. Today, U.S. public money primarily consists
5
The general public
transactions. Banks and certain other institutions can access central bank reserve balances.
Coin is also considered public money and is issued by the Treasury. There are $2.2 trillion in
commercial bank accounts.
Certain other liabilities of nonbanks, such as balances held with
9
There is currently at least
$19.4 trillion in private money in the United States.
10
4 A historical source for this taxonomy (along with a fourth function, standard of value) is
meaning that these instruments are valid payment for debts, taxes, and other dues. See See also
A Lawyer’s Perspective on U.S. Payment System Evolution and Money in the Digital Age,
https://www.federalreserve.gov/econres/notes/feds-notes/a-lawyers-perspective-on-us-
payment-system-evolution-and-money-in-the-digital-age-20220204.htm.
securities should be considered. SeeThe Aggregate Demand for
Treasury Debt, The Liquidity Premium of Near-Money Assets
See
pdf
depository institutions. Transactions within the same institution (e.g., between two customers of the same bank) set-
tle in the liabilities of that institution.
, Federal Reserve Statistical Release H.4.1
; , Treasury Bulletin
2022), .
See supra noteat 25.
9 See id.
10 This estimate is calculated as M2 less currency in circulation. ,
Money Stock Measures–H.6 Release.
The Future of Money and Payments
Money and payments
3
Public and private money have coexisted throughout U.S. history. Because public money is
currently only accessible to the general public as paper currency or coins, private money can
be more convenient for the public to use to make payments. And while public and private
of this, settlement in central bank money eliminates uncertainty in transactions, supporting
of a government backstop (e.g., a central bank lender of last resort or deposit insurance).
Private money usually promises conversion on a one-for-one basis into public money, on
demand. Because of this feature, private money is susceptible to runs. Runs can happen
runs at federally and state-chartered insured depository institutions is mitigated substantially
through prudential supervision and regulation, eligibility to access the discount window, and
federal deposit insurance.
11
But not all private money enjoys similar safeguards and therefore
some issuers of private money may be more susceptible to runs.
12
Payment systems
Payment systems facilitate the exchange of goods and services for money and, as such,
enable the economy to function. A payment system is a set of rules and processes for
transferring money. A payment involves sharing and verifying instructions (e.g., How much?
To whom?), in a process referred to as “clearing,” and the transfer of funds to discharge the
obligation, referred to as “settlement.”
associated with the transaction.
high volumes of lower-value transactions on behalf of consumers and businesses, and may
11 See supra note. See generallyBank Runs,
Deposit Insurance, and Liquidity
12 See supra note.
See ,
, Glossary, ;
k (March 19, 2021), https://www.federalreserve.gov/payment-
; supra note 2.
Money and payments
4
real time or continuous settlement. A single form of money can use more than one payment
system; for example, private bank money (i.e., deposits) can be transferred using checks,
automated clearing house (ACH) systems or debit cards.
Physical currency is the simplest form of payment and embodies many essential features that
noncash payment systems seek to emulate. A payment in cash settles immediately, does not
rely on an extension of credit by a third party, and enables recipients to access the proceeds
of a transaction immediately. Cash is also nearly universally accepted, does not carry an
additional charge or fee per transaction, and typically protects users’ privacy, which may be
valuable for a wide array of consumers including vulnerable populations.
At the same time, cash is inconvenient for large transactions, is vulnerable to being lost or
-
tions
14
laundering controls, terrorists and other criminals have increasingly turned to cash to transfer
15
transfer systems, ACH operators, and credit and debit card systems. Together, these systems
and on a transaction-by-transaction basis (referred to as “gross” settlement).
Other noncash
payment systems settle batches of transactions at predetermined times (referred to as “net”
settlement) or with deferred settlement of obligations. Regardless of gross or net settlement,
14
15 , https://
.
time-critical payments.” , Fedwire Funds Services, https://www.
.
The Future of Money and Payments
Money and payments
5
fraudulent transactions.
Because net settlement may not occur instantly, noncash payment system can expose par-
volume.
Cross-border payment systems
Cross-border payments occur when persons or businesses in one jurisdiction send or receive
money from other persons or businesses in another. Consumers in the United States typically
make cross-border payments from the United States using cash, debit and credit cards, or
household to another, money transfer operators allow consumers to use bank accounts,
credit and debit cards, and cash in-store to fund transfers, making funds available to a recip-
ient at a foreign branch or local agent, typically paid out in the form of cash but sometimes
merchants, either while traveling abroad or shopping online, consumers and businesses can
generally use credit and debit cards issued by a domestic bank for purchases. Consumers or
businesses can also send money abroad via ACH or wire transfer. Depending on the region,
cross-border retail payments can take up to multiple days to clear, and remittance payments
fees of up to 10 percent.
Cross-border payments typically settle through correspondent banking networks,
on a per transaction basis for wholesale payments and a netted basis for a batch of retail
payments.
19
Card networks rely on the correspondent banking system to settle cross-border
bank of the payee. Remittance service providers can also rely on correspondent banking
networks to send remittances to their destination, especially when the payment destination is
-
9-10 (Oct.
.
by other banks (respondents) and provides payment and other services to those respondent banks. See
,
, .
19 https://www.fsb.org/wp-con-
tent/uploads/P090420-2.pdf.
Money and payments
6
wholesale payments, large private cross-border payments platforms provide cross-border
-
20
Mexico, and Panama, allowing consumers and businesses to transfer funds directly from
U.S. bank accounts to bank accounts in those countries.
21
are increasingly entering the cross-border payments space, particularly for peer-to-peer
allowing consumers to fund “mobile wallets” online with their bank accounts and credit or
debit cards and to send money directly to foreign mobile wallets.
22
However, these providers
which both legs of a foreign exchange transaction are settled on the books of a single bank.
-
ships and active corridors has declined over the past decade.
24
Intermediaries
nonbanks, issue private forms of money and provide access to payment services.
Banks illustrate each of these roles. Banks issue insured deposits, uninsured deposits, and
money. Banks hold money balances for depositors, some of which are available on demand.
Banks enable the transfer of money through payment services, which allow their customers
to make payments to, or receive payments from, customers of the same or other banks.
allowing customers to convert their deposit balances into paper currency on a one-for-one
basis.
25
20 See generally , ,
.
21 , .
22 See generally How New Entrants Are Redefining Cross-Border Paymentshttps://www.
.
See, e.g., , Send Money to a Mobile Wallet, https://www.westernunion.com/fr/en/mobile-wallet.html.
24 , New Correspondent Banking Data – The Decline Continues, https://www.bis.
.
25
The Future of Money and Payments
Money and payments
7
payments services linked to mobile phone numbers. These services typically allow users to
they can use for payments and transfers via SMS messaging.
level, or both, but applicable regulatory frameworks vary by the type of institution and its
activities. Depending on their application, these frameworks may address a range of risks,
stability, and the smooth functioning of the payment system.
To protect user privacy,
-
information.
government scrutiny and surveillance.
29
makes an ATM withdrawal, a bank converts a portion of the customer’s deposit balance into cash on a one-for-one
converted into paper currency.
bank sponsor.
-
-
See generally
, The Bank Secrecy Act, -
prevent%20money%20laundering.
See
et seq.
29 See generallyet seq.
Money and payments
8
Table 1: Major noncash payment systems
30
System & Type Operator Participants Function & Features Volume
31
Fedwire
(Large-value,
Wholesale)
Reserve
Banks and other
account holders
payments. Real-time gross
settlement, transactions
processed.
Transactions: 204.5M
CHIPS
(Large-value,
Wholesale)
The Clearing
House
payments. Continuous
net settlement system that
matches, nets, and settles
transactions.
FedACH
Reserve
Banks, Treasury,
government
agencies
Batched direct debit and direct
credit payments. Used for pre-
such as payroll, social security,
and utilities.
Commercial ACH
Government ACH
Transactions: 2.0B
Electronic
Payments Network
(ACH)
The Clearing
House
Banks
(approximately
Batched direct debit and direct
credit payments. Primarily
recurring payments, such as
payroll, and utilities.
Transactions: 29.1B
See generally supra note,
Guidelines for Evaluating Account and Services Requests, https://www.federalreserve.gov/newsevents/pressreleases/
; supra
, About CHIPS, https://www.theclearinghouse.org/payment-systems/chips; , CHIPS
Participants,
; , FedACH Products & Services, -
;
, 2021 ACH Volume on TCH’s EPN Outpaces Industryhttps://www.theclearinghouse.
;
, Check Products & Services,
; , About the
FedNow Service, ; , RTP
Network Frequently Asked Questions, https://www.theclearinghouse.org/payment-systems/rtp/institution.
See , Fedwire Funds Services: Data and Additional Information,
; , CHIPS Annual Statistics
from 1970 to 2022,
; , Automated Clearinghouse Services:
Data, ; , 2021 ACH Volume on
TCH’s EPN Outpaces Industry, supra, ACH Network Sees 29.1 Billion Payments in 2021, Led by Major Gains
in B2B and Same Day ACH, https://www.nacha.org/news/ach-network-sees-291-billion-payments-2021-led-major-
gains-b2b-and-same-day-ach; , Check Services: Data, https://
; , Real-Time Payments for All Financial
Institutions, https://www.theclearinghouse.org/payment-systems/rtp
payments, see , Federal Reserve Payments Study (FRPS), https://
.
The Future of Money and Payments
Money and payments
9
System & Type Operator Participants Function & Features Volume
31
Check Services
Reserve
Banks,
Government
agencies
Paper and electronic collection
and processing of checks;
electronic is now the primary
method of check processing,
with collection and settlement
typically occurring within one
day.
Commercial checks
Government checks
Reserve
Banks and other
account holders,
U.S. Treasury
Bureau of the
payments at all times, including
time gross settlement.
Real Time Payment
The Clearing
House
Banks Real-time, gross settlement
Transactions: 41.2M
Table 1: Major noncash payment systems (continued)
Money and payments
10
Consumers and payments today
in person, merchants may present consumers with several payment options, including
cash, credit or debit card, prepaid card, mobile payment app, or check. Online shopping
and other electronic payments might allow consumers to use some of the same options,
as well as bank transfers (e.g., ACH payments) or other mechanisms for making electronic
below, provides a glimpse into the payment choices made by consumers in recent years.
19 pandemic.
certain other advanced economies.
Figure 1: Share of payments use (by number) over time
Source: Federal Reserve Bank of San Francisco
Emily Cubides & Shaun O’Brien, 2022 Findings from the Diary of Consumer Payment Choice,
(May 5, 2022),
from-the-diary-of-consumer-payment-choice/Diary of Consumer Payment Choice”]. See also
, Federal Reserve Payments Study (FRPS), supra
See Diary of Consumer Payment Choice, supra.
See , supra
The Future of Money and Payments
Money and payments
11
regulations, and rules that govern consumer transactions and promote consumer
consumer can be held liable for purchases made on a stolen card depends not just on
credit card or a debit card.
changes hands instantaneously, checks and bank transfers may take up to several days
before funds become available to the recipient. And while paying via credit or debit
merchants averages nearly 2 percent and 1 percent for credit and debit card transactions,
respectively.
These high costs are shouldered by American consumers and businesses
at far higher levels than their European or Canadian counterparts.
And while the costs
High fees contribute to many households remaining unbanked or underbanked.
Some
suggest that banks charge $15 billion or more each year in such fees.
40
Other households
rely on nonbank check cashers.
41
Comparewith
E).
99,
.
Id.
Id.; see also -
https://www.bis.org/publ/bisbull52.pdf.
https://www.fdic.gov/
analysis/household-survey/2019report.pdf.
40 CFPB Research Shows Banks’ Deep Dependence on Overdra Fees (Dec. 1, 2021),
.
41 See supra
Consumers and payments today
(continued from previous page)
Money and payments
12
The payment choices available to consumers must be understood within the broader
42
Although most U.S. households
such as check cashing and money orders.
And certain consumers may be less willing,
or less able, to participate in newer forms of payments.
44
Some evidence suggests that
lower-income consumers, for example, are several times more likely to make payments in
2.
45
average 5 percent for sending remittances from the United States), placing burdens on
consumers and families that need to send international remittances and may be the least
able to bear the cost.
have the same access to payment options, and certain segments of the population may
42 See The Global Findex Database 2021,
Data (survey data reporting 95% of individuals ages 15 and up with an account in the United States, which drops to
91% when considering only those in the poorest 40% of households, and is higher than the numbers reported for all
; see also The
Databank: Global Financial Inclusion, .
A household is “unbanked” if no one in the household had a checking or savings account; estimates for unbanked
supra
months: money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-
1, . See also ,
(2012).
44 See generally Diary of Consumer Payment Choice, supra
45 Id.
See , Average Transaction Cost of Sending Remittance from A Specific Country - United States, https://
; ,
Remittance Prices Worldwide, https://remittanceprices.worldbank.org/countrycorridors.
Consumers and payments today
(continued from previous page)
The Future of Money and Payments
Money and payments
13
Figure 2: Share of payment instrument use by household income
Source: Federal Reserve Bank of San Francisco
Recent innovations in money and payments
Recent years have seen innovations in money, U.S. retail and wholesale payments, and
cross-border payments.
Some of these innovations build additional user functionality on
top of existing payment systems, but two innovations are more fundamental and therefore
payment systems are an important upgrade to the current payment system. Stablecoins
aspire to be a new type of money supported by a novel payments technology; however,
characteristics compared to instant payments and other existing forms of money and pay-
and payments.
,
2021).
Consumers and Payments Today
(continued from previous page)
Money and payments
14
Instant payments
Retail instant payment systems (instant payment systems) process small-value interbank
transfers such that funds are available nearly instantly, as opposed to the potentially multi-
day settlement period for retail transfers on certain legacy bank payment systems.
payment systems usually use bank deposit money but ultimately settle in central bank
49
more likely that a payor can use an instant payment system to make a payment to a payee,
increasing the system’s value.
50
systems include the range of institutions that are eligible to participate, the number of
institutions that choose to participate, and how these institutions make the service available
of instant payments.
51
These systems could also expand access to electronic payments to
underserved or unbanked consumers. These capabilities have been included in international
52
Currently, federally insured depository institutions are eligible to participate in RTP.
The
to participate in instant payment systems, as certain foreign jurisdictions have done, could
for cross-border payments.
54
payments, though it may facilitate cross-border payments in the future.
See generally ,
Dec., https://www.bis.org/cpmi/
publ/d201.pdf; ,
, https://www.bis.org/cpmi/publ/
d154.pdf.
49 , About the FedNow Service, supra, RTP Network Frequently Asked
Questions, supra
50 See ,
supra
51 See, e.g., DUARTE , supra
52 Comparing India’s UPI and Brazil’s New Instant Payment System, PIX,
), .
, RTP Network Frequently Asked Questions, supra-
ing access to these services. See, e.g., Faster Payments in the United States, Hearing before the Senate Committee on
54 See, e.g., ,
ay ,
The Future of Money and Payments
Money and payments
15
Greater use of instant payments comes with new risks that should be appropriately
systems.
55
Certain central banks are also integrating these payment systems with shared directory
-
As part
of the G20 cross-border payments roadmap, jurisdictions are also considering ways to link
instant payment systems and the feasibility of new multilateral platforms and arrangements
to improve cross-border payments.
Stablecoins
Stablecoins are digital assets issued by private entities that aim to maintain a stable value
technology, such as blockchain.
59
These
https://www.bis.org/cpmi/publ/d202.pdf.
55 See generally ,
supra
See ., supra,
(Dec. 2019), .
See , , https://www.
.
See
, , https://home.treasury.gov/system/
”].
59 Stablecoin redemption rights can also vary considerably, in terms of both who may present a stablecoin to an issuer
Id.
Money and payments
16
paper, or sovereign debt) or other digital assets.
“Algorithmic” stablecoins purport to rely, in
whole or in part, on automated adjustments or incentives for market participants to, at least
issuer of the stablecoin, other intermediaries may be important to a stablecoin’s functioning.
provider to hold the cryptographic keys associated with their stablecoins and facilitate the
such as encouraging trading by market participants.
digital assets, proponents believe that stablecoins could become used widely as a means
-
ments – including both issuers and custodial wallets – may introduce or amplify risks to the
oversight of stablecoins and stablecoin arrangements is necessary to address these risks.
Stablecoins, including algorithmic and asset-backed stablecoins,
have already shown that
-
There are no standards regarding the composition of stablecoin reserve assets, and the information made publicly
available regarding the issuer’s reserve assets is not consistent across stablecoin arrangements as to either its content
Id.
See, e.g., , supra
prudential risks. See also (Oct.
https://www.fsb.org/2020/10/regulation-supervision-and-oversight-of-global-stablecoin-arrangements/.
See, e.g.Taming Wildcat Stablecoins
), .
See, e.g., Paul Tierno, Andrew P. Scott & Eva Su, Algorithmic Stablecoins and the TerraUSD Crash,
;
Runs on Algorithmic Stablecoins: Evidence from Iron, Titan, and Steelhttps://
www.federalreserve.gov/econres/notes/feds-notes/runs-on-algorithmic-stablecoins-evidence-from-iron-ti-
; Robert Hart, Tether Untethered: World’s Biggest Stablecoin Loses $1 Peg As
Crypto Market Crashes, (May 12, 2022), https://www.forbes.com/sites/roberthart/2022/05/12/
.
The Future of Money and Payments
Money and payments
17
holding the stablecoin’s reserve assets.
Today, stablecoins usually use a combination of blockchain technology and market interme-
diaries to process payments and transfer ownership of the digital asset.
recorded on a distributed ledger, payments are initiated when the payor broadcasts the
details of the intended transaction to validators. Validators then verify the validity of the
transactions before the transactions are appended to the record of previous transactions
by the operators of the system.
The design and functionality of the distributed ledger and the governance of the stablecoin
arrangement have implications for the speed and reliability of transfers in ownership.
transactions. These incentive structures may result in congestion or high fees.
By contrast,
permissioned blockchains may be less prone to congestion problems but might limit some
of the functionalities present in permissionless blockchains. Other stablecoin ownership
transfers are recorded “on the books” of an intermediary, such as a custodial wallet.
other respects, stablecoins face many of the same basic risks as traditional payment systems,
system governance, and settlement risk.
obligations. However, if a stablecoin was widely adopted globally as a means of payment, the
also make it attractive to criminals and the design of a stablecoin arrangement (e.g., use of
See generally , supra
See , -
, .
Digital “wallets” provide a variety of services to users, including facilitating the transfer of stablecoins between users. A
Money and payments
18
III. Potential U.S. CBDC design choices
A CBDC is a digital form of a country’s sovereign currency.
be convertible one-for-one into reserve balances or paper currency. And third, similar to
This section reviews selected design choices for CBDC, including features of the CBDC
instrument, intermediaries, and the payment system.
CBDC.
institutions, and retail CBDC intended to be accessed and used by a wide range of consumers
and businesses.
infrastructure of CBDC may blur these distinctions to some degree.
Money
for wholesale CBDC would be for large-value payments, analogous to how reserve balances
-
actions, including repurchase agreements or securities purchases, instead of bank deposits
CBDC and wholesale borrowing contracts could integrate CBDC. A CBDC could serve as a
settlement asset for “digital clearinghouses,” which could convert one type of digital asset
There may be other forms of digital sovereign currency. Consistent with the Executive Order, this report focuses on
depending on particular design choices.
See generally Service Details on Federal Reserve, Actions to
Support Interbank Settlement of Instant Payments
This section discusses the policy implications of various potential features and should not be read to make any deter-
Technical Evaluation for a U.S. Central Bank Digital Currency System.
-
See supra
supports these features.
and manage payments while the central bank records account balances.
See ,
March , .
The Future of Money and Payments
Potential U.S. CBDC design choices
19
A retail CBDC could be designed as an alternative to payments using cash, checks, credit
settings, users could value an instrument that is a central bank liability and is continuously
available. Businesses might choose retail CBDC over ACH, instant payments or wires for
could consider whether wholesale U.S. CBDC would pay interest, as reserve balances do.
wholesale CBDC could crowd out the production of potentially risky forms of private money,
A retail CBDC could also pay interest. Although paper currency does not pay interest, bank
terms of the use cases they support, deposit and lending rates might increase. That said,
there may be practical considerations that limit this pass-through. As with wholesale CBDC,
Payment system
would need to have appropriate cybersecurity incident management, contingency plans, and
continuity plans to ensure availability of its functionalities, including during natural disasters
. The paper discussed and sought comment on a variety of policy considerations
liabilities is one aspect of monetary policy implementation that should be considered. See
supra
See Sticky Deposit Rates
;
The Deposits Channel of Monetary Policy,
Potential U.S. CBDC design choices
20
A CBDC
settles instantaneously.
Beyond these core features, the system could also facilitate the use of transaction program-
bill payments could be automated using CBDC, similar to how ACH works today, or new func-
tions could be designed to facilitate micro and machine-to-machine payments. However,
programmability could add additional risks to users (e.g., if there are bugs in the code that
agreements) and, therefore, any use of programmability should be carefully evaluated to
A range of system designs could facilitate wholesale CBDC functions that would extend
hours. Depending on the design features and intermediary structure, wholesale CBDCs may
be able to facilitate settlement in systems or environments outside of this closed system.
CBDC is a riskless liability of the central bank, current technology suggests that CBDC would
be transferred on a system administered by the central bank. Technological developments
-
meaning the network of nodes that verify or commit transactions would be pre-approved
act as a node. However, a permissionless system could introduce distributed governance
and would present substantial risk for a CBDC, such that a central bank would be unlikely to
adopt it.
, Project Hamilton Phase 1 Executive Summary,
https://www.bostonfed.org/publications/one-time-pubs/project-hamilton-phase-1-executive-summary.aspx.
The Future of Money and Payments
Potential U.S. CBDC design choices
21
A U.S. CBDC could be designed to interoperate with foreign CBDCs to support and enhance
cross-border payments. Systems could have varying levels of interoperability including sep-
arate but compatible CBDC systems that share common technical standards and alignment
in their legal and regulatory frameworks, common user interfaces or clearing mechanisms
that are jointly designed and developed or adopted across jurisdictions, or jointly operated
and governed multi-CBDC systems. Research and experimental work have demonstrated
the potential for interoperable CBDC systems to complete international transfers and foreign
payments processed and settled through correspondent banking networks.
between jurisdictions during the development phase to establish common standards and
legal frameworks. As with other payment systems, higher levels of interoperability can
operated payment systems is relatively uncommon today due to the risks and technical
complexity, as well as considerations related to jurisdictions’ economic governance, rule of
law, national security, and the need to align regulations such as data protection and privacy
-
lenges would also exist for new cross-border payment systems developed using CBDCs.
pseudonymously recorded on the ledger, but with the passage of time and accumulation of
transaction data, transactions might be attributed to individual users; therefore, a publicly
amounts of information and, without appropriate safeguards, would pose privacy risks and
Intermediaries
There are two general architectures for CBDC intermediation: (1) a single-tier (i.e., direct)
CBDC with the central bank, and (2) a two-tier CBDC where intermediaries (potentially banks
bank records account balances. Under either approach an end user’s CBDC holdings would
See ,
Inthanon-LionRock to mBridge: Building a Multi CBDC Platform for International Payments, https://www.bis.org/publ/
othp40.htm.
Potential U.S. CBDC design choices
22
represent a direct claim against the central bank. However, considerations for these general
entity having access to customer due diligence and transaction information for all U.S. CBDC
A more feasible model in the United States for intermediating a retail U.S. CBDC would
be a two-tiered system, which is in line with what the majority of jurisdictions globally are
considering.
but the distribution of U.S. CBDC would be handled by intermediaries eligible for an account
other private sector participants. This would be similar to how paper currency is distributed
retail payments today: the intermediaries onboard, provide customer support, and manage
relevant supervisors would monitor compliance with those obligations.
nonbanks could also provide custodial or wallet services. Banks could provide a settlement
layer that interacts directly with the central bank, and nonbanks could provide an interface
intermediaries would need to ensure availability of wholesale CBDC, as well as a high degree
of security and resilience.
There could be institution holding limits on wholesale CBDC. A range of characteristics of
business lines of the intermediary, supervisory concerns, or operational considerations.
There could also be more general factors, such as the degree to which U.S. CBDC outstanding
(May 2022), https://www.bis.org/publ/bppdf/bispap125.
pdf.
The Future of Money and Payments
Potential U.S. CBDC design choices
23
markets, including the market for Treasury securities. These limits could change in times of
markets.
Beyond these two architectures for core features, a range of intermediation models could
apply. Consumers could hold retail CBDC in digital wallets, similar to some private digital
assets and nonbank payments services.
CBDC and commercial bank money or hold CBDC alongside other digital assets, promoting
particularly for larger-value transactions. Data structures and regulatory frameworks could
be established to promote consumer privacy and, as appropriate, additional standards for
reversibility or error mitigation.
provide wallets could provide the unbanked and the underbanked with greater options for
Potential U.S. CBDC design choices
24
AML/CFT controls and CBDC
illicit activity. Design choices of a CBDC, to include the user base, technological design,
CBDC. As part of CBDC design, relevant authorities and supervised intermediaries would
need to assess the risks and ensure that appropriate controls are in place to mitigate
obligations, would be lower than a retail CBDC with which consumers and businesses
retail CBDC used for low value, retail transactions or peer-to-peer transfers could be
abused by illicit actors looking to transfer smaller amounts of funds that may not trigger
higher the values a CBDC will support, and the more rapidly transactions take place,
especially to high-risk jurisdictions, the more risk it is likely to entail. Other critical factors
may include the extent to which user data is usable by and available to investigators, the
types of intermediaries that can distribute the CBDC, the extent to which users are subject
to and the scope of a customer due diligence process, and whether velocity or amount
limits exist.
AML/CFT obligations and supervision:
just as they currently are. Depending on the technical aspects of a CBDC, regulators may
program for CBDC.
The Future of Money and Payments
Potential U.S. CBDC design choices
25
User identication and privacy
used at much greater scale and velocity, because it would not be subject to the practical
limitations of paper money. Therefore, anonymity in a CBDC system could present
compared to physical cash. These risks could be more easily mitigated in an identity-
tiered system to enable intermediaries to identify instances of structuring designed to
avoid compliance thresholds. Tiered accounts could enable customers without identity
full customer due diligence, they would need to be carefully assessed and calibrated to
ever-changing risk environment.
A CBDC can be designed to incorporate technological innovations to both enable user-
should be protected from unlawful access. A CBDC could also incorporate trustworthy
fraud, while also reducing incentives for fraudsters and hackers to steal and misuse
“Trustworthy” digital identity is shorthand for technology and infrastructure with built-in safeguards and regula-
consumer choice, convenient, and are subject to appropriate technical standards, trust frameworks, and governance.
-
nologies. See , U.S. and U.K. Launch Innovation Prize Challenges in Privacy-Enhancing Technologies
to Tackle Financial Crime and Public Health Emergencieshttps://www.whitehouse.gov/ostp/news-up-
-
nancial-crime-and-public-health-emergencies/.
AML/CFT controls and CBDC
(continued from previous page)
The Future of Money and Payments
Potential U.S. CBDC design choices
26
Programmable controls
would be needed to understand how intermediaries (in an intermediated CBDC) would
be responsible for developing and managing these controls. At a minimum, standards for
controls to customers, would need to be developed.
A CBDC with a common interface for intermediaries could also provide opportunities for
compliance controls.
data and privacy protections and could seek to incorporate technological innovations
and transactions. The collection and storage of this data would pose obvious privacy and
See generallyhttps://
.
AML/CFT controls and CBDC
(continued from previous page)
The Future of Money and Payments
Potential U.S. CBDC design choices
27
U.S. international engagement on digital assets
Biden a framework for interagency engagement with foreign counterparts and in
international fora as directed in the Executive Order.
The framework is intended to
ensure that, with respect to the development of digital assets, America’s core democratic
values are respected; consumers, investors, and businesses are protected; appropriate
monetary system are maintained.
The U.S. Government has been an active participant in international engagement on
Since that time, the
During
work led to a set of shared policy principles for retail CBDCs that established guidelines
for jurisdictions in their exploration and potential development of CBDCs.
Moreover,
while a country’s CBDC would be issued by its central bank, the infrastructure supporting
it could involve both public and private participants. This presents opportunities for
U.S. companies to lead in the development of these technical systems and for the U.S.
long-standing public commitments to transparency, the rule of law, and sound economic
governance.
See , Fact Sheet: Framework for International Engagement on Digital Assets
.
See
2020),
html.
(CBDCs) (2021), https://assets.publishing.
.
Potential U.S. CBDC design choices
28
collaborative work on digital assets through multilateral fora and will continue to
elevate its participation in these bodies. The United States continues work on the G20
roadmap for addressing challenges and frictions with cross-border payments, including
other frictions in data governance frameworks, the international dimensions of CBDC
designs, and the potential of well-regulated stablecoin arrangements.
The United States
the international standard-setting bodies, is leading work on issues related to stablecoins,
other international dimensions of digital assets and payments, and cross-border
payments.
The United States must continue to work with international partners on standards
for the development of digital payment architectures and CBDCs to reduce payment
implementation of international standards through bilateral and regional engagements.
Across all engagements, the United States will seek to ensure a coordinated message,
limit duplication, and encourage that work is maintained within its primary stakeholders.
See , supra
U.S. international engagement on digital assets
(continued from previous page)
The Future of Money and Payments
Potential U.S. CBDC design choices
29
IV. Policy considerations
This section reviews policy considerations related to the introduction of a CBDC. To support
compares the policy implications of a CBDC with those of two recent innovations, instant
structure, function, and regulatory status of these products, which provide important context
for the comparisons below.
The policy considerations discussed in this section are based on the objectives set out in
the Executive Order and outlined in the Appendix. These considerations relate to four broad
themes:
• Building the future of money and payments: The future system of money and
-
tion, achieve a high degree of resilience, and facilitate cross-border transactions.
• Supporting U.S. global nancial leadership: The future money and payment sys-
tems should be consistent with the global role of the dollar; enable the enforcement
of sanctions; and advance democratic values, human rights, and privacy.
• Advancing nancial inclusion and equity: -
ing a potential U.S. CBDC, should enable access to and preserve choice for a broad set
of potential consumers and users, particularly for those Americans underserved by
the traditional banking system.
• Minimizing risks: The system should be consistent with preserving economic growth
-
ronmentally sustainable.
Consideration 1: Building the future of money and payments
Developing a U.S. CBDC could support progress towards goals related to payment system
costs.
Payment system eciency
Speed and cost
A CBDC system could be faster than certain existing electronic payment systems, as a CBDC
could reduce technological frictions by increasing the speed of transactions and ensuring
Policy considerations
30
Costs of operating a U.S. CBDC would likely be in line with those of comparable
priced services.
Even so, some consideration of the costs of developing CBDC, how these
be noted.
Transactions using instant payment systems can occur in seconds (or less), but it is possible
participating institutions will depend on the costs of operating the service, plus a private-sec-
will depend on competitive dynamics, including the range of institutions that have access
agents.
-
appropriate regulation and oversight, stablecoins present other risks, including the risk of
runs.
Technological innovation
Foundational technology
CBDC would provide a foundation for further innovations in payments by providing a safe
could enable transaction programmability (i.e., being able to add rules into a CBDC system
could settle the associated interbank exposures instantaneously and automatically. CBDC
-
A High Performance Payment Processing System Designed
for Central Bank Digital Currencies (), https://www.bostonfed.org/publications/one-time-
pubs/project-hamilton-phase-1-executive-summary.aspx.
been earned if a private-sector business provided the services. See
, Policies: Principles for the Pricing of Federal Reserve Bank Services, https://www.federalreserve.gov/payment-
. See also
The Future of Money and Payments
Policy considerations
31
could also allow for nearly instantaneous settlement of a wide range of transactions on a
More generally, code for CBDC could be open source, expanding the pool of developers
who can review and build on the code base, although open-source code may carry its own
operational risks that must be considered. Protocols built by such developers could be
combined to support additional services.
At the same time, given the need for a CBDC to be
extremely reliable and stable, it may not be able to experiment with the latest technological
developments as fast as the private sector could.
new entrants that are able to provide innovative services to their clients participate directly
in these systems. However, it is not clear that instant payment systems will support the same
range of use cases as a CBDC. Stablecoins may support technological innovation in pay-
or are more prone to cyber and operational risks.
Public-private partnership
The payment system should support innovations from the public and private sectors to meet
introduced as a public-sector initiative.
Current payment systems, including ACH, have also
new functionality and standard setting.
-
ple, CBDC systems could allow for composability with private sector-developed applications,
while instant payment systems could support integration with private sector-developed
services.
Payment system resilience
A payment system is resilient if it functions reliably, is capable of handling high user and
transaction loads, is well-protected against cyber and operational risks, and can resume
A CBDC should aim to be secure and functional in a range of environments, both at initial
See , supra
See generally , .
-
sentatives to set standards and policies. See generallyAbout Us, https://www.nacha.org/content/about-us.
Policy considerations
32
publicly provided, CBDC would be designed in ways to account for potential externalities
generated by a payment system. As such, it might provide broader protections against cyber
or operational risks than a privately operated payment system would. However, a CBDC also
would be a target for cyber attackers and, therefore, would need extensive cybersecurity
protection and its design would need a robust incident response program in case of a
compromise.
90
consider security and resilience when they incorporate new design features.
91
Potential
stablecoin vulnerabilities include coding bugs in the smart contracts that support the
stablecoin, security issues related to the keys used to mint and burn stablecoins, and in the
blockchain-based applications to which users deploy them.
92
Cross-border
CBDCs could also present an opportunity to rethink the international payment system.
Adopting common technical standards and legal frameworks could reduce frictions in
cross-border payments. Research and experimental work on cross-border multilateral CBDC
systems have suggested the potential for platforms to facilitate peer-to-peer CBDC payments
on a payment-versus-payment basis, which could reduce settlement risk and increase the
settlement speed of cross-border payments and foreign exchange transactions.
There are some countervailing considerations, however. As noted, high levels of interop-
erability between CBDCs could introduce counterparty, operational, and cyber risks.
Governance of a multi-CBDC system could also prove extremely challenging due to chal-
the enforcement of sanctions imposed by participating jurisdictions.
work is underway to facilitate fast payment system interoperability. By reducing the number
90 See generallyTechnology and Finance, chapter
2, in , https://www.iese.edu/faculty-research/initiatives/banking/.
91 See generallyOperational Resilience in Digital Payments:
Experiences and Issues (Dec. 10, 2021), (Dec. 2021), https://www.elibrary.imf.org/view/jour-
.
92 SeeThe Technology Underlying Stablecoins -
coins.html.
See , Multiple CBDC (mCBDC) Bridge, https://www.bis.org/about/bisih/topics/
.
The Future of Money and Payments
Policy considerations
33
of intermediaries involved in cross-border payments, appropriately designed stablecoin
Consideration 2: Supporting U.S. global financial leadership
Role of the dollar
CBDCs will create competition for the dollar, undermining its global use. However, the
include the United States’ strong economic performance; sound macroeconomic policies
-
94
do not address the structural factors above. Additionally, to be broadly adopted, a foreign
medium for cross-currency settlement.
-
for stablecoins globally, assets backing stablecoins, and regulatory framework(s) applied
to stablecoins in the United States and abroad. Cross-border use of stablecoins could also
introduce unintended spillover risks.
Sanctions and other nancial measures
threats and deny criminals and other illicit actors access to the U.S. and international
94 See ,
(Dec. 2021),
.
Policy considerations
34
95
magnify economic and political impact.
proliferating weapons of mass destruction, to fund and conduct illicit activities and evade
U.S. sanctions.
for rogue actors or countries that are subject to sanctions or disagree with U.S. sanctions
policy to avoid U.S. jurisdiction by not dealing in U.S. dollars, with U.S. persons, or with
persons otherwise subject to U.S. jurisdiction. The marginal use of a cross-border payment
system created in support of one or more foreign CBDCs, particularly if issued by countries
that do not share U.S. values and national security goals, could help actors to circumvent U.S.
policy tools.
these factors in the near term. Over time, however, it is possible that a U.S. CBDC could help
-
uals or entities transacting or holding a U.S. CBDC could be subject to U.S. jurisdiction and
thereby subject to U.S. sanctions.
dollars globally, and depending on the design and compliance with sanctions obligations,
institutions that do not hold dollar-based reserves or are not U.S. persons, other involved
95 See generally , (Oct. 2021), https://home.
; Fact Sheet:
Overview of Section 311 of the USA PATRIOT Act.
The Future of Money and Payments
Policy considerations
35
Democratic values, human rights, and privacy
Payment systems, including a potential CBDC, should be designed in a manner consistent
with democratic values, human rights, and privacy. Some countries may seek to leverage
or pressure on political opponents, or control economic activity. Privacy considerations
may be especially pronounced for communities hesitant or unable to engage in the existing
collected by the central bank. The system design, deployment, and maintenance should
adhere to privacy engineering and risk management best practices, including disassociability,
Technological innovations, such as
-
ing research and development in privacy-enhancing technologies as a critical component of
U.S. CBDC technological research.
Along with these design considerations, a CBDC system should have a governance structure
that applies to both the central bank and intermediaries, that includes consumer protections
government scrutiny. The central bank and any third-party intermediaries should provide
be used and protected. These governance features should be in line with U.S. government
privacy standards.
Depending on design, a CBDC could present particularly pronounced
concerns about the federal government’s access to sensitive private information and the
development of a U.S. CBDC may warrant the reevaluation of existing privacy standards and
so. Consistent with the framework outlined in the Executive Order, the United States has an
interest in ensuring that such systems are aligned with the principles of privacy, human rights,
and other democratic values. As noted in our framework, the U.S. government is actively
engaged internationally to promote the development of digital asset and CBDC technologies
, .
See generallyet seq.
et seq.
Policy considerations
36
-
tion of global principles and standards for how digital assets are used and transacted.
The privacy considerations implicated by instant payment systems would be similar to those
public distributed ledger. Given advances in blockchain analytics technology, this public
aggregation of transactions could present risks to privacy.
Consideration 3: Advancing financial inclusion and equity
particularly for those underserved by the traditional banking system, promoting greater and
99
currently unbanked or underbanked.
CBDC, should enable access for a broad set of potential consumers and uses, with appro-
resolution of errors.
services, as well as bank and other sources of credit. This includes expanding access for
people of color, rural communities, individuals without the resources to maintain expensive
devices or reliable internet access, and individuals with cognitive, motor, or sensory impair-
ments. The payment system should also prevent harm. Technological advances, educational
material, and support should be leveraged to overcome the potential technical and eco-
nomic barriers to using a payment system that may disproportionately harm some commu-
A CBDC could serve the unbanked and underbanked by providing a low-cost, easily acces-
sible alternative to existing private sector payment services. To do so, there would likely
See, e.g., (April 2022), https://www.whitehouse.gov/wp-content/
uploads/2022/04/ERP-2022.pdf; , supra
99 Seesupra
The Future of Money and Payments
Policy considerations
37
and reduce the need for the transfer of physical cash. As it is designed, implemented, and
maintained, a payment system that is designed by the federal government should take
Advancing Racial Equity and Support for Underserved
Communities Through the Federal GovernmentTransforming Federal
Customer Experience and Service Delivery to Rebuild Trust in Government).
100
access to technological services, the ability to pay for any costs associated with the system,
of the data collected with a CBDC system. To mitigate the risk, a U.S. CBDC could incorporate
cash.
mandated.
payment systems could have an associated framework or foundation, that could include
technology, that participants could use with their communities and customers to promote
these accounts could include access to instant payment services. This could be a gateway
-
are not subject to comprehensive federal prudential regulation.
Some proponents of stablecoins argue that stablecoins have the potential to promote inclu-
sion goals by reducing the cost of payments and reliance on banks and other intermediaries.
-
ated with access to technology.
100
Policy considerations
38
Consideration 4: Minimizing risks
A system of money and payment should have design features that protect the singleness of
Singleness of the currency
par from one form or issuer to another. Cash, reserve balances, and bank deposits all satisfy
stress.
101
of the payment system also could result from the growth of private forms of money that are
not interoperable.
By construction, and assuming that a U.S. CBDC would be convertible one-for-one with
102
Even if
private-sector-issued stablecoins or other money-like digital assets continued to circulate, a
CBDC could be used as a settlement medium across platforms, ensuring convertibility across
term liabilities for cash.
and broadly accessible payment services, which could increase the attractiveness of bank
deposits and thereby reduce demand for nonbank mediums of exchange.
well-designed and regulated dollar-denominated stablecoins could support the singleness
of the currency, stablecoins currently are not subject to appropriate regulation and oversight
to establish such a framework would mitigate these risks and help ensure that they remain in
place over time.
101 See Clearinghouses and the Origin
of Central Banking in the United States,
102 See Barry Eichengreen, From Commodity to Fiat and Now to Crypto: What Does History Tell Us?
.
See, e.g., , supra
The Future of Money and Payments
Policy considerations
39
Safe assets and stress
reserve balances, a broadly available safe asset could crowd out private money creation.
104
of a crisis or losses during periods of stress. A CBDC could also mitigate maturity mismatch
on bank balance sheets, if deposit holders substituted towards CBDC and banks then turned
to alternative sources of funding.
105
from banks or other intermediaries, broadening the availability of dollars in more than one
form and easing funding pressures in stress periods. Meanwhile, wholesale CBDC could be
market infrastructures that encourage money settlements to occur in central bank money.
implications on credit availability to businesses or consumers.
Evidence
are relatively modest; simple interfaces or ease of transfer into CBDC could paradoxically
lower such costs and increase risks.
-
on CBDC, if that functionality was incorporated, or to impose holding limits.
Authorities would also have to consider the appropriate level of foreign access to a U.S. CBDC
104 See generallyA Comparative-Advantage Approach to
Government Debt Maturity
105 See Todd Keister & Cyril Monnet, Central Bank Digital Currency: Stability and Information
-
tral-bank-digital-currency.pdf.
See ,
2 (April 2012), https://www.bis.org/cpmi/publ/d101a.pdf.
See generallyOvernight
RRP Operations as a Monetary Policy Tool: Some Design Considerations,
(2015), https://www.federalreserve.gov/econres/feds/over-
night-rrp-operations-as-a-monetary-policy-tool-some-design-considerations.htm. Under some conditions, theo-
See Stephen D.
Central Bank Digital Currency and Flight to Safety, 142
See generallySophisticated and Unsophisticated Runs,
Policy considerations
40
especially in times of stress, a U.S. CBDC that facilitates easier foreign access to the dollar out-
side of the United States could increase currency substitution pressures abroad, undermine
features of other safe assets. On the one hand, a stablecoin might not incorporate holding
stablecoins may be subject to congestion and high transaction fees that could also add to
outside of the United States could also raise similar issues abroad as a U.S. CBDC.
Credit creation
deposits, banks may have a more limited ability to make loans, in addition to potential
intermediation are uncertain.
109
of entities granted access to these systems: whether the ability to participate in the service
109 Some research suggests that total intermediation would remain unchanged, although the funding of intermedia-
SeeOn The Equivalence of Private and Public Money
.
The Future of Money and Payments
Policy considerations
41
intermediation would depend more on how stablecoins are issued and the extent to which
the assets backing stablecoins include loans or other private credit. To the extent that the
could be more pronounced.
Illicit nance
The regime is
-
mitment to mitigate their use in facilitating crime.
110
record keeping, as necessary, as well as ensuring that intermediaries are supervised by the
also use access tiering based on user accounts, such as where account restrictions (e.g.,
at-scale could allow malign actors, such as sanctioned individuals, to move, hold, or launder
limitations.
and other allies and partners to consider leading cross-border payment experiments focused
also work with allies and partners to address the risks of a potential foreign CBDC used to
110 See , suprasupra
Policy considerations
42
posed by CBDCs.
-
-
including stablecoins, that are in line with the global standards.
111
these gaps by using services in countries with weak regulatory and supervisory regimes to
launder funds, store proceeds of crime, or evade sanctions in stablecoins or other digital
assets. The
-
sion of digital assets.
Environmental sustainability
The United States has set overarching environmental priorities, including cutting U.S.
economy by 2050.
112
A new payments system or improvements to existing payment systems
greenhouse gas emissions, and other pollution, and improve environmental performance
-
which consumes relatively less energy than a permissionless implementation, as the majority
of the energy use from permissionless blockchains derives from the consensus mechanism.
111 https://
Virtual%20Assets-VASPs.pdf.
112 See
https://www.whitehouse.gov/wp-content/
.
See
Sept. 2022), https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Crypto-Assets-
and-Climate-Report.pdf.
The Future of Money and Payments
Policy considerations
43
of a U.S. CBDC technology. This technology could form the basis of environmentally sustain-
-
sistent with the Administration’s climate goals. The proof-of-work consensus mechanism
associated with certain blockchains uses more energy than some countries do.
114
Therefore,
from a sustainability perspective. Although technologies are under development that could
lessen energy use, a permissioned blockchain or instant payments would be more sustain-
able options with current technology.
114 See id.
Policy considerations
44
V. Recommendations
States also needs to continue to innovate in support of its policy objectives. As set out in the
Executive Order and outlined in the Appendix of this report, these objectives center around
themes of developing a future system of money and payments that promotes U.S. values,
these objectives. The recommendations are for the U.S. government to:
Recommendation 1: Advance work on a possible U.S. CBDC, in case one is
determined to be in the national interest.
-
ment on the technology that would support a U.S. CBDC is needed, and could take years. A
growth and stability, protect against cyber and operational risks, be consistent with individual
A potential U.S. CBDC could also have national security implications, and should be designed
Moreover, the United States should ensure that international standards for CBDCs are consis-
or higher credit costs for businesses and governments. Moreover, a U.S. CBDC must be
extremely reliable and, for that reason, technological experimentation with U.S. CBDC may
not be at the same speed as private sector payment innovations.
Money and
Payments: The U.S. Dollar in the Age of Digital Transformation.
115
The discussion paper
will only pursue a U.S. CBDC in the context of broad public and cross-governmental support.
design elements of a CBDC; continue evaluating policy considerations as described in its
115 , supra
The Future of Money and Payments
Recommendations
45
on these initiatives, given the strong public interest in this topic; and consider how research
and development on digital assets and other related innovations that is conducted or sup-
actions in the following areas should be taken:
•
Group”) to coordinate and consider implications of adoption of a U.S. CBDC for policy
objectives such as national security, democratic values, the smooth functioning of the
Group will continue to assess the merits of a CBDC and leverage cross-government
•
-
ing with allies and partners to promote shared learning and responsible development
of CBDCs.
•
Group and share updates on CDBC and other payments innovations. Representatives
Recommendation 2: Encourage use of instant payment systems to support
a more competitive, ecient, and inclusive U.S. payment landscape.
soon, capable of handling higher volumes of transactions at lower cost than some current
payment systems. Experience with instant payment systems around the world suggests that
inclusive and might also reduce the costs of cross-border transactions.
payment systems are directly accessible only by depository institutions or members of
Potential improvements to cross-border payment systems
present a range of challenges, including governance issues and risks that might arise when
considering interoperability of cross-border systems.
, supra.
Recommendations
46
The U.S. government should consider the following actions related to instant payment
systems:
•
• The U.S. government should promote development and use of innovative access
technologies by payment providers, to facilitate greater consumer access to, and use
where necessary, and potentially public-private partnerships to explore possibilities
•
support the use of instant payment systems. The U.S. government sends and receives
millions of payments per day. Use of instant payment systems by U.S. government
agencies could promote the expedient distribution of disaster, emergency or other
government-to-consumer payments, potentially providing more rapid support for
underserved communities.
Recommendation 3: Establish a federal framework for payments
regulation to protect users and the financial system, while supporting
responsible innovations in payments.
increasingly providing payment services, including issuing money (or money-like) liabilities
and processing payments. On the one hand, participation by nonbank payments companies
may contribute to higher levels of competition, inclusion, and innovation. On the other, if
risks. Accordingly, Treasury recommends consideration of the establishment of a federal
-
A federal framework for payments regulation could support responsible innovation in
payments by establishing appropriate federal oversight of nonbank companies that are
involved in the issuance, custody, or transfer of money or money-like assets. Today, nonbank
The Future of Money and Payments
Recommendations
47
and supervised at a state level.
State oversight of nonbank payment providers varies
-
tional risks in a consistent and comprehensive manner.
A federal framework for payments
and other standards that may exist currently at the state level, and thus build on existing
consider existing state and federal standards, the nature and risks of payment activities, and
providers.
both a U.S. CBDC and instant payments. As discussed above, a U.S. CBDC system may rely on
intermediaries for a wide range of services, including payment services, custody, and distri-
bution. A federal framework for payments regulation would provide a clear basis for oversight
provide a pathway for allowing nonbank payment providers to participate directly in instant
payment systems (see Recommendation 2).
119
Recommendation 4: Prioritize eorts to improve cross-border payments.
and also with forward-looking work that leverages new technologies. The United States
also has a strong national interest in being at the forefront of technological development
U.S. national security.
-
2020, the G20 endorsed a roadmap for enhancing cross-border payments, which sets out an
Secrecy Act. See, e.g.et seq.et seq. See also
See
https://crsreports.congress.gov/
;
Dan Awrey, Bad
Money, Mapping the Shadow Payment System
.
119 See , supra.
Recommendations
48
ambitious workplan to meet the U.S. policy priority of developing a faster, cheaper, and more
transparent international payments system.
to achieve outcomes in coordination with other jurisdictions, including but not limited to:
•
cross-border payments, while protecting U.S. national security;
• Considering the feasibility of new multilateral platforms and arrangements for
• -
works for cross-border payments; and
•
The Future of Money and Payments
Recommendations
49
VI. Appendix: Policy objectives
that inform this Report’s analysis of payment system innovations, including a potential U.S.
CBDC.
Because this Appendix may also serve as a set of shared objectives for other reports
-
ate for in-depth consideration by other reports.
1. Provide benets and mitigate risks for consumers, investors, and businesses
120
a.
b. Consumers, investors, and businesses should be digitally protected
2. Promote economic growth and nancial stability and mitigate systemic risk
121
a. The payment system should support economic activity
b.
c. The payment system should be operable in normal circumstances and under stress
3. Improve payment systems
122
a. The payment system should be functional
b.
c. The payment system should be secure
d.
4. Ensure the global nancial system has appropriate transparency, connectivity, and
platform and architecture interoperability or transferability, as appropriate
123
a. The payment system should be appropriately interoperable.
5. Advance nancial inclusion and equity
124
a. All should be able to use the payment system
b.
120 See, e.g.,
121 See, e.g., id. at
122 See, e.g., id. at
See, e.g., id. at
124 See, e.g., id. at 1; 2(e); 4(a)(i); 4(a)(iii); 4(b)(ii); 5(a).
6. Protect national security
125
a.
b.
including the global role of the dollar
7. Provide ability to exercise human rights
126
a. The payment system should respect democratic values and human rights.
8. Align with democratic and environmental values, including privacy protections
127
a.
b. The payment system should be sustainable
125 See, e.g., id. at
See, e.g., id. at 1; 2(f); 4(a)(i); 4(b)(vi).
See, e.g., id. at
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Appendix: Policy objectives
51
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