US Fed economists are exploring the "intrinsic" value drivers of CBDCs

Fed economists are beginning their deep dive into CBDC research, hoping to identify the "Intrinsic" value drivers of a digital dollar.

The Federal Reserve has broadened its research on central bank digital currencies, or CBDCs, in a new review that was posted to its website Monday.

In a report titled, "Central Bank Digital Currency: A Literature Review," Fed economists Francesca Carapella and Jean Flemming compiled research exploring the potential impact of a digital dollar on commercial banking and monetary policy.

The review provides a theoretical underpinning for understanding how CBDCs could influence consumer adoption and financial stability.

"From a theoretical standpoint, the introduction of a central bank digital currency raises long-standing questions relating to the provision of public and private money and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households."

"As with any new literature, many questions remain. We believe the most crucial question is which intrinsic features of CBDC as a means of payment and a store of value are important for households' portfolio choices as to which monies to use."

On Aug. 13, the Fed released an original research paper comparing CBDCs to other payment methods.

Authors Paul Wong and Jesse Leigh Maniff concluded that a CBDC would "Never be able to fully replicate" all the features of cash and real-time gross settlement services, but that it could enhance both modes of payment.

Although CBDCs have been described as the central bank "Arms race" of the decade, the Fed is in no rush to adopt the so-called digital dollar.

Fed Chair Jerome Powell said last month that a CBDC is unlikely to be rolled out anytime soon because the U.S. already has a "Safe and active dynamic domestic payment system."