It seems to me that there has been considerable private-sector innovation in the payments industry without a CBDC, and it is conceivable that a Fed CBDC, or even plans for one, might deter private-sector innovation by effectively “occupying the field." In brief, the potential benefits of a Federal Reserve CBDC are unclear. Conversely, a Federal Reserve CBDC could pose significant and concrete risks.
The financial system is likely to continue to change rapidly, and both regulators and market participants need the capacity to keep pace. Regulators have been hampered by a lack of authority to collect and analyze information from unregulated entities. But the recent financial crisis illustrated that substantial risks from leverage and maturity transformation were outside of regulated financial firms.