FedAccounts: Digital Dollars

46 Pages Posted: 7 Jun 2018 Last revised: 16 Jul 2020

See all articles by Morgan Ricks

Morgan Ricks

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

John Crawford

UC Law, San Francisco

Lev Menand

Columbia University - Law School

Date Written: April 15, 2020


We are on the cusp of a new monetary era. Central bankers around the world are increasingly worried that privately controlled digital currencies will relegate them to the sidelines of monetary affairs. To avoid this fate, central banks have been studying, and in some cases actively pursuing, issuing digital currencies of their own: so-called central bank digital currency (CBDC).

Although this is one of the hottest topics in macroeconomics and central banking today, the discussion has all but overlooked the most straightforward and, we argue, most appealing strategy for implementing a U.S. dollar-based CBDC: expanding access to the bank accounts the Federal Reserve already offers to a small, favored set of clients. These accounts consist of entries in a digital ledger—just like other digital currencies—and are extremely desirable, offering high interest, instant payments, and full government backing no matter how large the account balance. But U.S. law restricts these accounts to an exclusive clientele consisting primarily of banks. Privileged access to these accounts creates a striking asymmetry at the core of our monetary framework: government-issued physical currency is an open-access resource, available to all, but government-issued digital currency (in the form of central bank accounts) is not.

In the current digital era, there is no respectable justification for this dichotomy. Congress should authorize the Federal Reserve to give the general public—individuals, businesses, and institutions—the option to hold accounts at the central bank, which we call FedAccounts. Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and would be walled off from the existing system of money and payments, the FedAccount CBDC would be seamlessly interoperable with the mainstream payment system and would rely on technologies that the Federal Reserve has used successfully for decades.

The FedAccount CBDC would offer an astonishing range of benefits that other CBDC proposals—not to mention privately controlled digital currencies—cannot match, including a much more inclusive financial system, better consumer protection, faster and more efficient payments, greater financial and macroeconomic stability, improved monetary policy transmission, reduced payment tolls (interchange fees), streamlined regulation and regulatory structures, and increased fiscal revenue arising from the recapture of economic rents from the financial sector.

Keywords: banking, central banking, payments

Suggested Citation

Ricks, Morgan and Crawford, John and Menand, Lev, FedAccounts: Digital Dollars (April 15, 2020). Vanderbilt Law Research Paper 18-33, UC Hastings Research Paper No. 287, George Washington Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3192162 or http://dx.doi.org/10.2139/ssrn.3192162

Morgan Ricks (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

John Crawford

UC Law, San Francisco ( email )

200 McAllister Street
San Francisco, CA 94102
United States

Lev Menand

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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