card lines may strain their cash flow and force them to cut spending or require them to use more expensive forms of short - term credit, such as trade finance. changes in the use of payment instruments consumer credit pricing and availability also appear to affect consumer preferences for different payment methods. when consumers decide how to pay for their purchases, they may have a variety of payment options to choose from, including cash, checks, debit cards, credit cards, prepaid cards, and even, increasingly, their mobile phones. the federal reserve has tracked changes in consumers ’ use of payment instruments in a number of studies over the past decade. these studies cast an interesting light on the effects that weakened economic conditions have had on the mix of payments. the number of checks processed in the united states has been declining since the late 1990s, as consumers, businesses, and governments have shifted away from checks and toward electronic payment methods. the annual number of checks dropped from more than 40 billion in 2000 to 30 billion in 2006, and we expect the data for 2009 to show continued declines. at the same time, the use of debit and credit cards has risen. debit card payments, in particular, have grown remarkably : between 2000 and 2008, the number of debit card transactions grew at an annual rate of more than 17 percent, while the value of debit card transactions grew 15 percent per year. credit card transactions have grown at a slower pace than debit card transactions over the same period – about 2 percent per year in number and roughly 5 percent per year in value. for smaller - value payments, both types of cards, but especially debit cards, have served as substitutes for checks and, very likely, cash. although the nature of cash makes direct measurement of aggregate cash payments difficult, we can infer a trend in usage from changes in the level of small - denomination currency that is most frequently used in cash payments. the amount of small - denomination domestic currency in circulation has been steadily declining since the 1970s, leading us to believe that cash payments have similarly declined. most interestingly, the recent period of economic weakness appears to have caused some consumers to shift away from credit cards not only as a source of credit but also as a method of payment. as i said earlier, between late 2008 and early 2010, the value of credit card purchases declined 10 percent. in comparison, although the rate of growth in debit card use slowed during the recession, debit card transactions did not decline in either volume or

in the absence of a cbdc, some of these risks i noted may still exist as the private sector continues to innovate, including the risk of substitution from commercial bank deposits to digital wallets, and the migration to less regulated digital assets, including stablecoins. with such significant potential opportunities, risks, and tradeoffs, it is essential that the federal reserve continue to thoroughly research and engage with stakeholders to further understand these issues. future decisions about the implementation of technology innovations in money and payments, including a potential u. s. cbdc, must be informed by a deep and thorough understanding of potential intended and unintended consequences, as well as understanding whether a cbdc would be the most effective and efficient means to improve the payment system and address identified problems. the federal reserve has continued its independent research and technical experimentation on digital innovations, including digital assets and cbdc. specific to cbdc, the federal reserve established a program of work that aims to ( 1 ) carry out policy analysis to provide perspectives on issues articulated in the board ’ s january 2022 discussion paper ; ( 2 ) conduct technology research and experimentation to inform potential cbdc designs ; and ( 3 ) invest in engagement with the public, industry, academia, and the public sector to bring along stakeholders and obtain needed expertise. concluding thoughts : the potential future of cbdc in the united states of course, as the evolution of money and payments continues, it is important for the federal reserve to continue looking ahead to anticipate potential changes to money and - 13 payments well into the future. with this in mind, our consideration of other potential innovations to money and payments, including a potential u. s. cbdc, must be viewed through the lens of whether and how the payment system would be improved beyond what instant payment services will achieve. we should ask “ what current frictions exist or may emerge in the payment system that only a cbdc can solve, or that a cbdc can solve most efficiently? ” in my view, it is important that the federal reserve is a part of the ongoing conversations around cbdcs, whether or not a cbdc is ultimately created in the united states. as the federal reserve continues to monitor developments in other jurisdictions, we will work closely with international counterparts on payments innovation, cbdc, and other related topics. this includes work with multilateral institutions such as the bank for international settlements, the g7, and the financial stability board, as well as bilateral engagements with other central banks