As digital currencies and emerging financial technologies continue to transform the global financial system, central bank digital currencies (CBDCs) have become an important area of research for governments, financial institutions, and policymakers.
The Digital Dollar Project’s White Paper 2.0: Revisiting the Digital Dollar Project’s Exploration of a U.S. Central Bank Digital Currency reassesses the opportunities and challenges associated with a potential U.S. digital dollar.
Published in January 2023, the white paper builds on the Digital Dollar Project’s original 2020 research, examining developments in global CBDC initiatives, revisiting its proposed model for a tokenized digital dollar, and considering the implications for payments, financial privacy, monetary policy, and international competitiveness.
This overview highlights the paper’s main themes and recommendations, including the importance of continued experimentation, private-sector collaboration, and U.S. participation in global digital currency standards.
The Global CBDC Landscape and the Future of the U.S. Dollar
The development of central bank digital currencies accelerated significantly between the publication of the Digital Dollar Project’s original white paper in May 2020 and its January 2023 update.
According to figures cited in the report, 114 countries or currency unions were exploring CBDCs as of January 2023, compared with 35 in May 2020. At that time, 11 countries had already deployed a CBDC.
The white paper examines digital currency developments across Europe, Asia-Pacific, Africa, and the Americas, highlighting the different approaches being explored by central banks.
These initiatives reflect a range of objectives, including improving payment efficiency, supporting financial inclusion, modernizing settlement infrastructure, and enabling cross-border transactions.
As international digital currency networks develop, the research considers their potential implications for the U.S. dollar’s role in global trade and finance.
The paper emphasizes that U.S. participation in digital currency research and international standards discussions remains important, regardless of whether the United States ultimately decides to issue a CBDC.
Revisiting the Champion Model for a Digital Dollar
A central focus of the white paper is the Digital Dollar Project’s proposed champion model for a potential U.S. CBDC.
Originally introduced in 2020, the model provides a conceptual framework for testing how a tokenized digital dollar could operate within the existing financial system.
The 2023 paper revisits several foundational principles, including tokenization, the continued role of financial intermediaries, privacy, monetary policy neutrality, and private-sector innovation.
Under the proposed model, a digital dollar would represent a third format of central bank money, operating alongside physical currency and the digital reserves held by financial institutions at the Federal Reserve.
Rather than replacing cash or existing payment systems, it would provide an additional way to access and transfer central bank money.
The model also seeks to preserve the United States’ two-tiered banking system, with commercial banks and other regulated financial intermediaries continuing to distribute money and provide financial services.
The report emphasizes that technical design choices should be guided by functional needs and that digital currency infrastructure must remain adaptable to future technological developments.
Tokenization, Payments, and Financial Inclusion
Tokenization is one of the defining characteristics of the Digital Dollar Project’s proposed digital dollar model.
Unlike conventional account-based payment systems, a tokenized CBDC could represent central bank money as a transferable digital instrument, potentially enabling new approaches to payments and settlement.
The white paper examines how tokenization could improve transaction efficiency, portability, and accessibility while supporting innovation across financial services.
Potential applications include retail payments, peer-to-peer transfers, and wholesale financial transactions involving securities settlement and other large-value payments.
Financial inclusion is another important area of research.
The paper considers how digital wallets and new payment infrastructure could help expand access to financial services for unbanked and underbanked communities.
However, these benefits would depend on practical design considerations, including affordability, accessible onboarding, privacy protections, offline payment capabilities, and the involvement of regulated financial institutions.
The research recognizes that a digital dollar would not automatically resolve existing financial inclusion challenges and that real-world experimentation is needed to evaluate potential benefits.
Financial Privacy, Monetary Policy, and Private-Sector Innovation
The white paper identifies financial privacy as a foundational consideration for a potential U.S. CBDC.
A digital dollar should protect individuals against undue surveillance and inappropriate use of financial information while supporting legitimate regulatory and financial crime prevention requirements.
The research also emphasizes monetary policy neutrality. The introduction of a CBDC should not undermine the Federal Reserve’s ability to conduct monetary policy or manage inflation.
Another important consideration is maintaining opportunities for private-sector innovation.
The Digital Dollar Project explores how commercial banks, financial technology companies, and other regulated institutions could develop digital wallets, payment services, and new financial applications using tokenized central bank money.
Rather than treating CBDCs and privately issued digital currencies as necessarily competing alternatives, the paper considers how different forms of digital money could coexist.
These issues demonstrate the importance of evaluating technical capabilities alongside financial stability, regulatory requirements, and the continued operation of existing financial infrastructure.
CBDC Research, Pilots, and International Standards
The Digital Dollar Project emphasizes the importance of practical experimentation in evaluating the potential benefits and challenges of a U.S. CBDC.
The white paper highlights several research initiatives, including a simulated CBDC pilot completed in November 2022 with the Depository Trust & Clearing Corporation (DTCC), supported by Accenture.
The pilot explored how a tokenized digital dollar might function within U.S. clearing and settlement infrastructure.
The report also discusses the Digital Dollar Project’s Technical Sandbox Program and its work with industry participants to evaluate potential technologies and use cases.
Beyond domestic experimentation, the paper examines the importance of international CBDC interoperability.
As countries develop different digital currency networks, common technical and governance standards could help reduce fragmentation and enable more efficient cross-border payments.
The research highlights the need for U.S. engagement in standards covering interoperability, financial privacy, security, and the broader operation of digital currency infrastructure.
Three Recommendations for U.S. CBDC Exploration
The white paper concludes with three high-level recommendations intended to support informed decision-making about the future of a potential digital dollar.
1. Expand Government Research and Public-Private Collaboration
The Digital Dollar Project recommends increasing U.S. government investment and activity in CBDC research, including transparent public-private partnerships to examine technical infrastructure, financial privacy, and security considerations.
2. Demonstrate Leadership in International Digital Currency Standards
The paper calls for U.S. participation in international digital currency standard-setting, independent of any decision to deploy a domestic CBDC.
3. Strengthen Private-Sector Understanding of Global CBDC Developments
The research encourages U.S. businesses, financial institutions, academic organizations, and nonprofit institutions to evaluate how international CBDC deployments could affect their operations and strategic decisions.
Together, these recommendations emphasize continued research, collaboration, and international engagement rather than immediate deployment of a particular CBDC model.
The white paper provides a foundation for further exploration of how the U.S. dollar could evolve alongside emerging financial technologies while preserving financial privacy, supporting responsible innovation, and maintaining public trust.
