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Congressional Research Servce
Inforrning the legislative debate since 1914
Updated April 10, 2025
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 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.
Background
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. 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. However,
digital payments are not always as fast, inexpensive, or
ubiquitous as some would desire at present. 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 participated in 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.
Design 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
protected using cryptography and pseudonymous. (For
background, see CRS Report R47425, Cryptocurrency:
Selected Policy Issues.) 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
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