WASHINGTON—The Treasury announced on Wednesday it will form a working group with the Federal Reserve and other agencies to shape global central bank digital currency standards amid
"We are engaging in the technological development of a CBDC so that we would be able to move forward rapidly if a CBDC were determined to be in the national interest," Liang
The Treasury official outlined a variety of factors the working group would consider, including U.S. global strategic interests, national security risks, and the privacy and accessibility of a potential wholesale and retail digital dollar alike.
A central bank digital currency would likely have three core features, Liang said. It would be legal tender, it would be convertible one-for-one into other forms of central bank money—reserve balances or paper currency—and it would clear and settle nearly instantly.
A wholesale CBDC in the form of a tokenized central bank liability could provide additional accessibility and efficiency at settling real-time around-the-clock payments domestically and across borders, Liang said. She conceded that a CBDC isn't the only option on the table.
"Depending on design, a wholesale CBDC may also enable more efficient cross-border payments…at the same time, some of the potential benefits of a wholesale CBDC might also be possible through upgrades to real-time payment systems, including interlinkages between real-time payment systems in different jurisdictions," she said.
Liang also made clear a retail CBDC would pose a variety of risks, including the need to balance user privacy and inclusion while preventing access by illicit actors. She also noted that CBDC design choices would involve balancing a number of trade-offs.
"One way of reconciling privacy with illicit finance concerns in a retail CBDC might be to have a tiered structure in which less data is collected for small dollar transactions or small volume accounts," Liang said.
"But limits on the amount or number of transactions could make a retail CBDC less useful to end-users. This suggests a three-way trade-off among privacy, countering illicit finance goals, and inclusion."
Liang also expressed the need to consider financial stability when developing standards.
"The potential for runs [on] a retail CBDC could destabilize private sector lending during stress periods," she said.
Liang also signaled banks would play a major part in facilitating transactions.
"The Fed has stated that a potential U.S. CBDC, if one were created, would best serve the United States by being 'intermediated,' meaning that the private sector would offer accounts," she noted, going on to say that further details on who would act as facilitators, and how they'd be regulated, would be ongoing matters of deliberation.
The working group—consisting of officials from the Treasury, Federal Reserve, Council of Economic Advisors, National Economic Council, National Security Council, and Office of Science and Technology Policy—will meet in the next few months and provide regular updates to the public.
The U.S. is a global latecomer to the CBDC game, and Federal Reserve officials have
