New Momentum for Central Bank Digital Currencies

The European Central Bank has moved a step closer to launching a digital euro, a decision that puts more pressure on the U.S. to adopt a digital dollar backed by the Federal Reserve. 

The ECB said Wednesday that it has moved into an investigative stage where it is examining the design and distribution of a digital euro. The phase is set to last two years, with the possibility of introducing a currency within four years. But based on what the ECB has said, the eventual adoption of a digital euro seems likely. That raises some interesting issues for U.S. policy makers. 

The situation in the U.S. is complicated. The Fed would need approval from Congress for a central bank digital currency, or CBDC, a process that could be slow and bumpy. Anticipated opposition from private banks poses another hurdle—the importance of these institutions would diminish if a digital dollar was introduced.