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liiC ,sLlS- O55OCk ti'0 Wrlrl ,.ttOlUC uc- Fed Jit curO'ect.
The Bank for intemaotiona Set tl ments defines
Wnral ban i digitai cur ren-Cy as a digital lpayment
inl slt)et,* Cdenumnaid in th~'e nana11) ~l it Of
lccointY, that is a direct liability f the central
bank (BI 2020). In his seminannua appearance
bef-ore Cor-rss, Federlel Reserve Chairman je-rome
Powell indicated thS the ed was s-udine the idea
of creatngt a new d ar -b ased centtl bank digital
currency (USCELDC) (Lee -o2) The11 design of
USCBDC has important upsicatons i r t : he US Ailan-
clal system. To farltate th plcy ditscussion, .
discuss tiw a US dii a cur*rency relates no exisnting
forms of dollar-based money, r.e payments sys-
te-m, c- 0mpet ng privately issued stablec- n-s, and
the policy is-sues associated wth USCBDC design.
Centrad Bank Money, Digital Money,
and Efdency of Payments Systems
Lt pr-sent, the Federal Reserve issues two types of
central hank moe'----paler Federal Reserve notes
and digital Federal Reserve deposits (Board of
GJoVern~ors 01 the Fed1ran Reserve Sy~sterm 202 tb)
Digital deposits are money recorded in (electronic)
ledger entries wi no ph ysical form Digital Fed-
eral Reserve cposit, can only be held by financial
nstittltions (ptrniai banks). eligible for master
accounts at a IFdra Res erve hank.
Mtosz businesses arid consu-mers are not eligible
to swn Federal Reserve masmer accounts, so they
cannot Own1 F'edetai Reserve digitalI deposits under
current a rrngemernts. Ttey cn own central bank
toney in thc form of papr Fed8 ral Reserve notes
or hold nani mney----US :llar-cenmnated
digtal currency ina the tort ob hank deop oss that
are exchuageabl lt par into paper lFedral es-
notes, Unlic central bank digital neo y bank-
issued digital deposits can be subject 'o etult
losses if the bank issuing deposits fals. -owever,
avrik deposits up to f 5octo per depositor are
fully insured by the Federal Deposit insuiralnee
Corporationr FDIC, andr the mnaxinmumr effective
\ 'N \~
Should the Federal Reserve Issue a
Central Bank Digital](ViewImageLocal?handle=hein.amenin/aeiaebx0001&div=1&collection=&method=preview&ext=.png&size=3)