Central Banks Don’t Need Their Own Digital Currencies

Whether central banks should issue their own digital currencies may sound like an arcane debate. But allowing them to do so could have a profound impact on a nation’s economic and financial landscape — and not for the better.

The various proposals are works in progress, but share one basic feature: Central banks would issue electronic deposits. These deposits would be available to eligible citizens or businesses, allowing a greater number of parties direct access to the accounting and payments mechanisms of the central bank. One simple version of the proposal would let individuals hold an account at the Federal Reserve, just as they can hold an account at Bank of America. It would be like a “public option” for banking, albeit with an electronic focus and direct access to the Fed.