US Fed economists are exploring the “intrinsic” value drivers of CBDCs

The United States Federal Reserve has broadened its research on central bank digital currencies, or CBDCs, in a new review that was posted to its website Monday.

In a report titled “Central Bank Digital Currency: A Literature Review,” Fed economists Francesca Carapella and Jean Flemming compile research exploring the potential impact of a digital dollar on commercial banking and monetary policy. The review provides a theoretical underpinning for understanding how CBDCs could influence consumer adoption and financial stability.

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The authors write:

“From a theoretical standpoint, the introduction of a central bank digital currency (CBDC) raises long-standing questions relating to the provision of public and private money […] and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households.”

A literature review is essentially an environmental scan on a particular topic that is used to justify the need for additional research. The Fed’s report identified the “intrinsic features of CBDC” as the most important research question to tackle moving forward: 

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“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.”