As Regulators Double Click On Crypto, CBDC And Stablecoins Remain Favorites

Back in January, the U.S. Board of Governors of the Federal Reserve (the "Federal Reserve") released its long-awaited discussion paper, "Money and Payments: The U.S. Dollar in the Age of Digital Transformation" (the "Report"), beginning a public dialogue about central bank digital currencies ("CBDCs") and weighing the merits of a U.S. CBDC.

For the purposes of the Report, a CBDC is defined as a "digital liability of a central bank that is widely available to the general public" and further, a "digital form of paper money." In this respect, a CBDC is like a stablecoin because a CBDC also seeks to maintain a stable value and become an alternate payment mechanism that can be used to facilitate trading and lending, lessen the friction surrounding cross-border payments, and help foster more financial inclusion. However, unlike a stablecoin backed by reference assets like a national currency, commodities, or another digital asset, a U.S. CBDC (i.e., a digital dollar)