An executive order that President Joe Biden signed in March 2022 explores the possibility of creating a centralized bank digital currency (CBDC), or “digital dollar,” in the U.S.
Conversations about a potential CBDC have led to widespread speculation about what it could mean for Americans’ money.
Recent articles and videos that have circulated online claim that the U.S. government is planning to “recall” paper currency and replace it with a digital dollar. Many of the posters say the launch of a new Federal Reserve payment system called FedNow is also behind the alleged transition to digital currency.
Rosalie emailed VERIFY to ask if those claims are true.
Is the U.S. government planning to recall the dollar?
No, the U.S. government is not planning to recall the dollar.
WHAT WE FOUND
The federal government does not have plans to recall cash and replace it with a digital dollar.
A central bank digital currency (CBDC) is digital money “backed and issued by a central bank,” according to The Atlantic Council. In the United States, that central bank would be the Federal Reserve.
Under Executive Order 14067, the Federal Reserve is tasked with looking into how a CBDC might be created, and evaluating necessary steps and requirements for implementing one.
The U.S. does not currently have a CBDC and the Fed has not made any decisions on issuing a digital dollar. On its website, the Federal Reserve says it would only move forward with issuing a CBDC with “an authorizing law” passed by Congress.
If the Fed does issue a digital dollar in the future, it does not mean the government would get rid of cash.
“There is nothing in the executive order that ends or eliminates cash. Period,” Aaron Klein, senior fellow in economic studies at the Brookings Institution, previously told VERIFY.
The Federal Reserve also says that it is “committed to ensuring the continued safety and availability of cash and is considering a CBDC as a means to expand safe payment options, not to reduce or replace them.”
FedNow, the instant payment system that went live in July 2023, is not a form of currency and it doesn’t create a CBDC, either, as some people online have claimed.
“Rather, it’s merely an electronic system, run by the Federal Reserve, by which money can be transferred between banks more quickly than under prior systems,” Steven Schwarcz, a professor of law and business at Duke University School of Law, previously said.
If your financial institution participates in FedNow, you’ll be able to “send and receive instant payments in real time, around the clock, every day of the year,” the Fed says.
For example, FedNow allows people to instantly receive their paychecks and use them the same day, according to the Fed. A company could also instantly access funds when an invoice is paid if their bank uses the payment system.
So we can VERIFY that the federal government has no plans to recall physical cash and replace it with a digital dollar.