By Eric Kennedy, Payments Product Manager at Apiture

Maybe you’ve heard of Bitcoin, or even own some of it. Maybe you’re a Bitcoin miner or you’ve delved into other cryptocurrencies and understand the benefits to our society. Maybe you are still waiting for cryptocurrencies to just disappear and not be a thing. Whatever your relationship is with cryptocurrencies, the fact remains that crypto is here to stay and that this is only the beginning. 

Earlier this year, the Federal Reserve released a research paper examining the pros and cons of a U.S.-backed Central Bank Digital Currency, or CBDC. The U.S. has always been a few steps behind other parts of the world that are quicker to adopt new technologies and infrastructures, and rightfully so, as the U.S. has the largest economy in the world.

The benefits of CBDC are clear, but the path to CBDC would reshape our entire economy and come with some associated risks. The Federal Reserve’s report identifies the benefits and risks of CBDC as the following:


  • Providing the public with access to digital money that is risk free in terms of credit and liquidity.
  • Streamlining cross-border payments by using new technologies, introducing simplified distribution channels, and creating additional opportunities for cross-jurisdictional collaboration and interoperability.
  • Preserving the dominant international role of the U.S. dollar.
  • Promoting financial inclusion — particularly for economically vulnerable households and communities.
  • Ensuring the continued safety and availability of cash and expanding safe payment options. Cash is currently the only central bank money that is available to the general public, and it remains an important and popular means of payment. According to a 2020 survey by the Federal Reserve, U.S. consumers used cash for 19 percent of total transactions (6 percent by value).


  • Changing the structure of the U.S. financial system, which could impact roles and responsibilities of the private sector and the central bank. Banks mainly rely on deposits to fund loans, and a CBDC could substitute for this commercial bank money. However, this substitution could reduce the overall amount of deposits in the banking system, which would then result in higher bank funding expenses, reduced credit availability, or an increase in credit costs.
  • Impacting the safety and stability of the financial system. Because money in a central bank is the safest form of money, risk-averse users might prefer a widely accessible CBDC, especially during times of stress within the financial system. CBDC could trigger runs on financial firms with its capability to quickly convert other forms of money — including deposits at commercial banks — into crypto.
  • Affecting monetary policy. The Federal Reserve currently operates under an “ample reserves” policy, exercising control over the level of the federal funds rate and other short-term interest rates by setting administered rates. A CBDC system could affect monetary policy implementation and interest rate control by changing the banking system’s supply of reserves.
  • Disrupting the relationship between privacy/data protection practices and the prevention of financial crimes. A CBDC would need to ensure that consumer privacy rights are protected, while maintaining the transparency needed to deter criminal activity.
  • Securing CBDC payment services from operational disruptions and cybersecurity threats. A CBDC infrastructure will need to deter cybersecurity threats, and the operational team must remain vigilant, as bad actors continue to hone methods and tactics. Additionally, the CBDC system should be designed to include offline capability for digital payments during natural disasters or other large disruptions.

The fact that the Federal Reserve is even considering a CBDC points to the ever-changing landscape in the payments space. Although the impact of a new payments infrastructure might be a big gamble for the U.S., it might be worth taking the risk for the potential economic upside. As you ponder the pros and cons of a CBDC or have thoughts on other forms of cryptocurrency, consider joining the national conversation and providing feedback to the Federal Reserve here.

To learn more about cryptocurrency and its impact on the financial industry, contact Apiture.