About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 [1] (March 18, 2026)

handle is hein.crs/govetvf0001 and id is 1 raw text is: Informing the Iegislative debate since 1914 Updated March 18, 2026 Central Bank Digital Currencies Policymakers have debated whether the Federal Reserve (Fed) should create a central bank digital currency (CBDC)-a digital dollar. A CBDC would share some of the technical features of cryptocurrencies (crypto)-that is, private digital currencies, such as Bitcoin, which are unsupported by any government authority. This In Focus describes how foreign central banks, the Administration, Congress, and the Fed are approaching the issue and discusses policy issues. For more detail, see CRS Report R46850, Central Bank Digital Currencies: Policy Issues. ackground Contrary to some of its creators' expectations, crypto has not become widely adopted for payments-its value has been too volatile to serve as an effective means of payment, transaction costs are too high, and it is neither legal tender nor backed by the full faith and credit of a government. Stablecoins, a type of cryptocurrency intended to keep a constant value, were introduced to overcome the volatility issue but have also not been widely adopted for retail payments. (P.L. 119-27 was recently enacted to encourage further adoption of stablecoins.) A CBDC, proponents believe, could overcome these barriers while taking advantage of the technology pioneered by crypto to create a more efficient, central-bank-backed digital payment system. Within the mainstream financial system, digital payments are already widespread in the United States. At present, digital payments are not always as fast, inexpensive, or ubiquitous as some would desire. A CBDC would presumably allow for real-time payments (i.e., instant settlement). Real-time payments are growing rapidly but are not yet ubiquitous in the United States. Their growth has accelerated since the introduction of FedNow, the Fed's real-time settlement system, in 2023. By contrast, developing a CBDC would take several years of significant information technology investment and testing. Federal Reserve and Executive Actions In January 2022, the Fed released a report on CBDC, which it defined as a digital liability of a central bank that is widely available to the general public. In the Fed's view, CBDC transactions would need to be final and completed in real time, allowing users to make payments to one another using a risk-free asset. Individuals, businesses, and governments could potentially use a CBDC to make basic purchases of goods and services or pay bills, and governments could use a CBDC to collect taxes or make benefit payments directly to citizens. The report identified four characteristics that it argued were necessary to best serve the needs of the United States, saying that a CBDC should be (1) privacy-protected to the extent compatible with deterring criminal use, (2) intermediated (i.e., retail services would be offered through financial institutions), (3) widely transferable among holders, and (4) identity-verified (i.e., not anonymous). The report took no position on several design features, such as whether the CBDC should pay interest, whether it should be available for use offline, and whether there should be size limits on transactions or holdings. The report stated that the Fed does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law. The report is not intended to advance a specific policy outcome and takes no position on the ultimate desirability of a U.S. CBDC. The Fed has also initiated pilot programs (Projects Hamilton, Cedar, and Agora) to build technical capacity pending a decision to adopt a CBDC. In March 2022, President Biden issued Executive Order 14067 on digital assets, which stated that the U.S. government should prioritize timely assessments of potential benefits and risks [of a U.S. CBDC] under various designs to ensure that the United States remains a leader in the international financial system. Pursuant to that order, Treasury, in consultation with various agencies, issued a report on CBDC in September 2022. That report did not take a position on whether to pursue a CBDC. In January 2025, President Trump issued Executive Order 14178 on digital financial technology. The order stated that agencies are prohibited from undertaking any action to establish, issue, or promote a CBDC and should terminate any plans or initiatives related to the creation of a CBDC. Desin Considerations A CBDC would allow holders to store value and make payments digitally and would be backed by the Fed (as is the case for physical currency), but other features are unresolved. Crypto generally records transfers on public, decentralized (or distributed) ledgers stored using blockchain technology. Often individuals' accounts are cryptographically protected and pseudonymous. It is unclear which of these features would be desirable in a CBDC or whether a CBDC might be built upon existing payment systems instead. From an end-user perspective, CBDC proposals range from a payment system similar to the status quo to one that is fundamentally different. At one end of the spectrum of proposals, a CBDC accessible only to banks may differ only slightly from the current system given that wholesale payment systems are already digital. At the other end, proposals for consumers to be able to hold CBDCs in accounts at the Fed would fundamentally change the role of the Fed and its relationship with consumers and banks. The Fed's report envisioned a middle ground where end users would access CBDC and related services through financial