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Digital Dolar


The digital dollar, as the name indicates, is the complementary digital form that the current legal tender dollar will take soon. Currently, we have cash to make physical payments and credit or debit cards that facilitate digital payments. In addition, the use of wallets is becoming more and more widespread and payment methods are being streamlined to respond to the growing demand of consumers to pay digitally. That is why the Digital Dollar arrives, an electronic currency that can be used by both individuals and companies to make and facilitate day-to-day payments, business transactions, etc.

As has happened in Europe with the Digital Euro, the United States Federal Reserve has already started with some initial investigations into the future of the Digital Dollar. For his part, President Biden has also spoken on this matter and welcomes the possible digitization of the dollar and the opportunities it can bring.

It should be noted that the Federal Reserve of the United States is the Central Bank of the country, therefore, the digital currency would be issued by it in the form of CBDC, that is, a Central Bank Digital Currency (CBDC), it is the digital format of a currency issued by the Central Banks of the different countries and that, therefore, has the same value and is subject to the same regulations as the existing currency. In the case of the US, the Digital Dollar would be issued by the Federal Reserve, which is the issuer of the current legal tender dollar.

Reviewing the present

What forms of currency custody exist today in the United States?

Today, the Federal Reserve, issuer of legal tender money, establishes that the currency can take the following forms:

-Central Bank Currency: It is the typical money that we know(the dollar), and is issued both in physical and digital format by the Central Bank, which transfers it to commercial banks for later use by the public.

-Commercial bank currency: The most common form of money in non-physical format. It is usually stored in bank accounts and can be withdrawn, make payments, etc.

-Non-bank money: The money that is stored in non-bank platforms that are supported by some banking infrastructure but that offer the service from their platform or application. Also known as Embedded Finance.

How to fit a CBDC in the United States?

There are still many doubts regarding the CBDC. The technology they are going to use is not known, nor are they sure if the correct way to launch the Digital Dollar is in the Central Bank Digital Currency format. Although there are benefits that the digital format of the dollar can bring, there are also certain risks that must be taken into consideration and that cast doubt on the experimental project that is being studied.

Where is the US on digital currencies?

The Federal Reserve (Central Bank), is, above all, since the beginning of Joe Biden’s term in 2021, actively experimenting and investigating the different aspects of the possible implementation of the Digital Dollar. Federal Reserve Research has 4 main categories: Technological Experimentation, Economic and Policy Research, Stakeholder Engagement and Outreach, and International Collaboration. Although the phases have been established, there is no established timeline, and the implementation time of each phase will be adjusted on the fly.

-Technological experimentation:

The Federal Reserve is testing different technologies that could be applied in the hypothetical case of the launch of the Digital Dollar, taking stock of the opportunities or difficulties that each of the options would bring, since the key is to provide a secure technology for citizens.

One of the options is to take advantage of the current infrastructure to launch a centralized CBDC that takes advantage of existing technologies and supports. Another option would also be a CBDC, however, supported by newer technologies such as the blockchain. In this sense, some US banks are working or, at least, contemplating the use of alternative platforms to the current ones to apply the DLT (Distributed Ledger Technology) technology of the blockchain. In addition, cybersecurity is another of the fundamental pillars for the Federal Reserve. In this field, they are analyzing different security solutions with current technologies to offer the greatest possible security to possible future users of the Digital Dollar.

-Economic and political research:

One of the main objectives of this research is to guarantee financial stability, security, and inclusion.

On the one hand, they are studying how the launch and design of a CBDC could contribute to financial inclusion. Since the digital era, those areas that lack infrastructure and resources have no chance to enter the digital world. In this sense, work is also being done and the Federal Reserve of the Bank of Atalanta is making some considerations on how to favor inclusion, since now, around 15% of Americans do not have access to the internet.

Security and privacy are also a priority. Political analysts are considering the different conflicts that may exist in the future with the possible launch of the Digital Dollar. Today, if the money we have in the bank is stolen, the problem is the bank’s security systems. However, in the hypothetical case that digital dollars were stolen from us, the security problems would belong to the Federal Reserve. The problem can be much bigger as it is an official institution. Therefore, they may need to put more emphasis on security.

-Involvement and outreach for stakeholders:

The Federal Reserve of the United States sees the participation of the different interested parties in the matter as relevant. To do this, they hold meetings with different interest groups to discuss the points of view of the CBDCs and to be able to draw broad conclusions. One of the events created is called Innovation Office Hours. Here, the latest technological innovations between the Federal Reserve and the different stakeholders are discussed and it helps to better understand the environment of the Central Bank Digital Currencies.

-International collaboration:

The Federal Reserve is in constant collaboration with the Central Banks of different countries in addition to collaborating with the BIS (Bank for International Settlements). Given that international transactions with digital currencies will continue to exist and could be very useful for both individuals and companies, the participation of different international bodies is important for greater unification of solutions and technologies.

Advantages and disadvantages

CBDCs could be a new reality in the payment system and the economy of everyday life. Even so, it is worth highlighting the opportunities or advantages that a possible arrival would bring or the disadvantages that could appear.


-A solution to a digital demand:

Faced with the constant progress of digitization, society is becoming increasingly demanding. In this case, with the digital money that could be in the hands of the public, a solution is given to a digital banking service that is not optimized and the opportunity to have digital money without the risks involved in investing in cryptocurrencies is given.

-More agility in international payments:

As we have mentioned before, there is a collaboration between the different organizations and Central Banks so that the technologies used go in the same direction and standardize processes that benefit all those who want to carry out transactions to other countries.

-In the case of the US, continue to predominate as the leading currency:

The dollar is the most used currency for payments and investments around the world. This means that the United States has a position of strength and can influence, more than other countries, the standardization processes so that everything is better suited to its currency, the dollar.

-More facilities:

The private use of the Digital Dollar, according to the Federal Reserve, can bring benefits in terms of the speed and agility of digital payments. For example, fees and insurance could be paid in a much more agile way, it could even be a good way to collect a salary in a safe way or receive a refund of taxes and other Federal transactions.

-Another alternative form of payment as added value:

Given the decrease in the use of cash, which is currently the only currency of the Central Bank, the Digital Dollar is presented as a complementary alternative, not a substitute, that citizens could use without risks and with the same regulations as physical money.


One of the most attractive advantages offered by the Digital Dollar may be the improvement in transparency. Money laundering will be more complicated, fraud may be more controlled and illicit money transactions may be detected. It is very difficult to eradicate all criminal actions, however, it is possible to go a step further and offer transparency on the part of the countries, never seen before.


-Possibility of clients leaving the banks:

By having the Digital Dollar in a safe way in some application or platform that, now, not much is known, it could be the case that users decide to transfer the money from their respective bank accounts to the platform that offers the digital currency. This would be a problem for the banks, as they would lose customers in the custody and card business. However, it seems that banks are also going to be part of this entire Digital Dollar framework and we will see how it evolves.

-Technology and design used:

It is said that the technology used and the design of the CBDC can affect US monetary policy. It is true that we have mentioned that they are considering different technologies for their possible implementation. However, it is not known exactly how each technology may affect the design of the digital currency. In addition, the demand that there will be as soon as the Digital Dollar is put into operation is not known, which fills those responsible for the project with uncertainties.

-Privacy, data protection and cybersecurity:

The aim is to find a balance between maintaining the privacy of users, but at the same time maintaining sufficient transparency to detect crimes. This is a great challenge since the data of the users and their transactions will be there. If it is decided to use the technology centralized by the Federal Reserve, the tracking could be greater than in cryptocurrencies, for example.

In turn, since the currency is digitized, like anything else, it is potentially hackable. A lot of work will have to be done in this field to be able to combine security, privacy but, at the same time, transparency, and traceability to detect criminal acts.