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The payments landscape for community banks is changing rapidly as traditional payments converge with new instant payment systems and emerging cryptocurrencies. It is critical for Community Banks to maintain awareness of developments in the payments space to assess new opportunities, mitigate risks, and ensure that their payment strategy aligns with overall business plans.
Jan. 21, 2022
The Federal Reserve Board released a long-awaited discussion paper that examines the pros and cons of a potential U.S. central bank digital currency, or CBDC.
Background: With policymakers debating a potential U.S. CBDC, the paper summarizes the state of the domestic payments system and discusses new types of digital payment methods and assets, including stablecoins and other cryptocurrencies.
Key Considerations: While the Fed said its paper does not favor any policy outcome, it identifies specific policy considerations, such as:
Balancing consumer privacy protections with transparency to deter criminal activity.
Using intermediaries to leverage the private sector and avoid systemic disruptions.
Ensuring a CBDC is readily transferable between customers of different intermediaries.
Supporting compliance with anti-money-laundering and anti-terrorist-financing rules.
Comments: The Fed invited public comment on the paper within 120 days. ICBA is reviewing the paper and will submit comments.
More: ICBA offers a series of blog posts on community bank CBDC considerations, including CBDC myths, where the U.S. stands in the CBDC race, why community banks should have an intermediary role, and a CBDC primer for community banks.