Federal Reserve proposes conditions for digital dollar as clearing system crashes for hours

On the 24th of Eastern Time, the Federal Reserve's automated clearinghouse services experienced a malfunction, causing many U.S. banks and exchanges to face issues with deposits and withdrawals. Cryptocurrency exchanges Coinbase and Kraken were also affected. Interestingly, on the same day, the Federal Reserve proposed the prerequisites for introducing a central bank digital currency (CBDC), echoing Federal Reserve Chairman Powell's statement on efforts to research a digital dollar.

Operational Error

The Federal Reserve experienced an operational error that caused disruptions in the electronic fund transfer system on the morning of the 24th in U.S. Eastern Time. The issue was resolved several hours later. According to the announcement, Federal Reserve member banks discovered the system malfunction in the morning and after confirmation by the Federal Reserve technical team, it was found to be due to an operational error. Further details are still under investigation.

The affected service institutions include: Account Services, Central Bank, Check 21, Check Adjustments, FedACH, FedCash, FedLine Advantage, FedLine Command, FedLine Direct, FedLine Web, Fedwire Funds, Fedwire Securities, and National Settlement.

Powell Recently Emphasized: A Year Focused on the Development of the Digital Dollar

Although the Federal Reserve settlement system operates at a different level from retail payment systems, the U.S. media coincidentally linked this incident to comments made by Powell during questioning, where he mentioned that the U.S. central bank is considering retail payment systems and working on the development of the digital dollar. This may also reflect an expectation for progress in traditional financial systems.

He stated: "This will be an important year for the development of this project." Powell also emphasized that legislative support is necessary to drive this initiative forward.

"We are very, very carefully evaluating whether we should issue a digital dollar," Powell stated.

Coincidentally, on the same day, the Federal Reserve also released a paper titled "Preconditions for a General Purpose Central Bank Digital Currency", which outlines conditions such as clear policy objectives, broad support from stakeholders, a robust legal framework, strong technological readiness, and market readiness.

The paper mentions Distributed Ledger Technology (DLT) in the technological aspect, but for the Federal Reserve, this technology still needs to advance further to accommodate the overall economic throughput of the United States.