settlements recently described as “ the most promising way of providing central bank money in the digital age. " 3 any such general purpose, accountbased cbdc would likely require explicit congressional authorization. central bank money versus commercial bank money it is useful to note that in our daily lives we use both central bank money and commercial bank money for transactions. central bank money ( i. e., money that is a liability of the federal reserve ) includes physical currency held by the general public and digital account balances held by banks at the federal reserve. the funds banks put into these accounts are called reserve balances, which are used to clear and settle payments between banks. 4 in contrast, checking and savings accounts at commercial banks are liabilities of the banks, not the federal reserve. the bulk of transactions, by value, that u. s. households and firms make each day use commercial bank money as the payment instrument. federal reserve accounts and commercial bank accounts under current law, the federal reserve offers accounts and payment services to commercial banks. 5 these accounts provide a risk - free settlement asset for trillions of dollars of daily interbank payments. importantly, the use of central bank money to settle interbank payments promotes financial stability because it eliminates credit and liquidity risk in systemically important payment systems. 6 1 / 6 bis central bankers'speeches congress did not establish the federal reserve to provide accounts directly to the general public ; the federal reserve instead works in the background by providing accounts to commercial banks, which then provide bank accounts to the general public. under this structure, commercial banks act as an intermediary between the federal reserve and the general public. the funds in commercial bank accounts are digital and can be used to make digital payments to households and businesses, but commercial banks promise to redeem a dollar in one ’ s bank account into $ 1 of u. s. currency. in short, banks peg the exchange rate between commercial bank money and the u. s. dollar at one - to - one. due to substantial regulatory and supervisory oversight and federal deposit insurance, households and firms reasonably view this fixed exchange rate as perfectly credible. consequently, they treat commercial bank money and central bank money as perfect substitutes — they are interchangeable as a means of payment. the credibility of this fixed exchange rate between commercial and central bank money is what allows our payment system to be stable and efficient. i will return to this point later. this division of functions between the federal reserve and commercial banks reflects an economic truth

assets that back up their liabilities 100 percent. they do not make loans or hold risky securities. return to text 16 however, stablecoin payment might not be free in the sense that stablecoin users would allow their financial transaction data to be harvested and monetized. return to text 17 the president ’ s working group on financial markets expects to issue recommendations related to stablecoins in the coming months. see home. treasury. gov / news / press - releases / jy0281. return to text 18 see aleksander berentsen and fabian schar “ the case for central bank electronic money and the non - case for central bank cryptocurrencies, ” federal reserve bank of st. louis, review 100, no. 2 ( second quarter 2018 ). return to text 19 see david andolfatto “ fedcoin : on the desirability of a central bank cryptocurrency, " macromania blog, february 3, 2015, andolfatto. blogspot. com / 2015 / 02 / fedcoin - on - desirability - of - government. html. return to text 6 / 6 bis central bankers'speeches