Central Bank Digitial Currency in Q2-23.

Macro Perspectives

The Vice Fed Chair, Lael Brainard, announced yesterday that the Fed will launch a new digital (instant) payment service in the second quarter of next year.

This has been in the works for a few years, but we shouldn't assume coincidence that this announcement comes the Monday after the global central bank meetings at Jackson Hole.

Is this a digital dollar?

One Fed governor says it weakens the case for a digital dollar (a central bank-backed digital currency, CBDC) because it solves a lot of the problems the CBDC is supposed to solve.

While that statement is meant to diminish the need for a CBDC, if it solves the same problems and ultimately moves us to a cashless society where every transaction passes through the Fed, then it is a central bank-backed digital currency.

With that, this is how the FedNow concept was described by the WSJ when the Fed announced this goal back in 2019: "The Federal Reserve plans to develop a faster payments system for banks to exchange money, providing a public option to another real-time network built by big banks. The new system would allow bill payments, paychecks and other common consumer or business transfers to be available instantly and round-the-clock."

This has been presented (to this point) as more of a "wholesale" or "institutional" solution.

Conversely, this is how Brainard presented it yesterday: The FedNow Service will transform the way everyday payments are made throughout the economy." And it's designed to be scalable "for high-volume retail transactions." With that, she called on all industry stakeholders to commit to the Fed's new instant payment infrastructure.

As you can see, this is intended to be transformational and ubiquitous (and at the consumer/retail level).

It doesn't take a lot of imagination to see the end of the road for paper money (both access to, and acceptance of), and the risk to political and economic freedoms that arise.

I will be an avid observer of Bitcoin et al between now and the Q2-23.

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