The Federal Reserve has explicitly stated it has no plans to issue or develop a central bank digital currency (CBDC), often referred to as a digital dollar. This position aligns with longstanding caution from the Fed, reinforced in 2025–2026 under Chair Jerome Powell.
The Fed’s 2022 discussion paper Money and Payments explored potential benefits and risks of a U.S. CBDC but took no position on whether to pursue one. It emphasized that any issuance would require clear support from the executive branch and Congress ideally via specific authorizing legislation. No such authorization has been granted.
In February 2025, Powell directly affirmed during congressional testimony that the Fed would not develop a CBDC while he leads the institution. He has repeatedly described the idea as unnecessary given the existing efficient U.S. payments system.
Recent reaffirmations from Fed officials, including references to statements by Randall Guynn, confirm there are currently no plans to create or issue one. This sets the U.S. apart from many other jurisdictions actively researching or piloting CBDCs.
An January 2025 executive order prohibited federal agencies from undertaking actions to establish, issue, or promote a CBDC and directed termination of related initiatives. Multiple bills aim to restrict or ban Fed issuance of a retail CBDC, with provisions incorporated into defense and other legislation. These reflect concerns over privacy, surveillance risks, financial stability, and disintermediation of banks.
The Fed has conducted technical research and pilots for learning purposes, but these do not indicate active development toward deployment. Projects like FedNow are instant payment services, not CBDCs. In short, while the Fed continues to monitor digital innovation and payments evolution including private stablecoins, which saw regulatory progress via the 2025 GENIUS Act, a government-issued retail CBDC is not on the agenda.
Any future shift would face significant legal, political, and practical hurdles requiring explicit congressional approval. This stance prioritizes the strengths of the current dollar system—cash, bank deposits, and private-sector innovations—over introducing a new central-bank liability with potential downsides for privacy and banking stability.
Central Bank Digital Currencies (CBDCs)—digital versions of fiat money issued directly by a central bank—raise significant privacy concerns because they shift from cash-like anonymity or intermediated bank records to systems where transaction data could be centralized, traceable, and potentially accessible to governments.
While privacy risks depend heavily on design, critics argue that even “privacy-protected” CBDCs fall short of cash and could enable unprecedented financial surveillance. A retail CBDC could create a direct government ledger of every transaction, eliminating the “air gap” provided by private banks or cash.
Unlike physical cash, where no one tracks who spends a $100 bill, a CBDC might require the central bank to maintain records for anti-money laundering (AML) and counter-terrorism (CFT) compliance. This enables real-time visibility into individuals’ spending, savings, and behavior. Federal Reserve Chair Jerome Powell noted in 2019 that a transparent CBDC could conceivably require the Federal Reserve to keep a running record of all payment data… a stark difference from cash and raises issues related to data privacy.
ECB President Christine Lagarde has similarly acknowledged that a digital euro would not offer “complete anonymity as there is with cash. In contrast to today’s bank deposits; protected somewhat by the third-party doctrine and requiring warrants or subpoenas for broad access, a CBDC stores data directly with the government by default, bypassing intermediaries and enabling keystroke surveillance.
Data Collection, Storage, and Misuse
CBDCs generate vast amounts of personally identifiable information (PII) and transaction data. Risks include: Data leaks or breaches: Centralized repositories become prime targets for cyberattacks, phishing, or malware. Governments or insiders could misuse data for profiling, discrimination, or non-financial purposes.
Cross-border flows: Varying privacy laws could expose data internationally. IMF analysis highlights that poor design leads to users losing control over who accesses their data and how it is used, potentially undermining trust in central bank money. CBDCs are often designed as programmable money—tokens that can expire, carry spending restrictions, or be monitored for compliance.
This goes beyond privacy to enable targeted restrictions, amplifying surveillance concerns. Critics warn this could evolve into de facto social or political controls. A single point of failure heightens risks of hacks that expose all users’ data at once, unlike fragmented private systems. Even anonymized designs may allow re-identification through data aggregation.
These risks are not hypothetical: surveys consistently rank privacy as a top public concern, with many viewing CBDCs as a step toward a surveillance state. Analyses of global trials show no CBDC matches cash-level privacy. Many require digital ID linkage, biometric ties, or full traceability, with data shared for welfare, tax, or AML purposes.
Privacy is not inevitable doom—design choices matter. Proponents including some central banks and recent research advocate: Privacy-by-Design and Privacy-Enhancing Technologies (PETs): Zero-knowledge proofs (ZKPs) allow verification (e.g., “this transaction is valid and the user has funds”) without revealing identities or details. Other tools include homomorphic encryption, differential privacy, and pseudonymity.
Private banks or fintechs handle customer identities and wallets; the central bank sees only aggregated or pseudonymous data. Tiered anonymity is common. Strict access rules, data minimization, user consent, audits, and separation of regulatory vs. operational functions within central banks.
A March 2026 study by UK researchers proposes a public blockchain-based retail CBDC using ZKPs and intermediaries to minimize central bank access to PII, arguing risks are real but solvable with governance. IMF and World Economic Forum perspectives note that well-designed CBDCs could even improve privacy over some private digital payments if PETs and laws are robust.
CBDC privacy risks are substantial and multifaceted, primarily stemming from centralization, traceability, and programmability—features that distinguish them from cash or even current digital banking. While cryptographic and legal mitigations exist and are actively researched, many experts and lawmakers view the potential for surveillance as outweighing benefits in privacy-sensitive jurisdictions like the US.
Any future CBDC would require extraordinary safeguards to avoid becoming a disaster for privacy, as some analyses have warned. Ongoing global pilots and 2026 research continue to test these trade-offs, but the debate underscores why caution prevails in many places.
