The Discount Rate is the interest rate charged by Federal Reserve Banks to depository institutions on short-term loans.

The Federal Open Market Committee (FOMC) formulates the nation’s Monetary Policy. The voting members of the FOMC consist of the seven members of the Board of Governors (BOG), the president of the Federal Reserve Bank of New York, and presidents of four other Reserve Banks who serve on a one-year rotating basis. All Reserve Bank presidents participate in FOMC policy discussions whether or not they are voting members. The chairman of the Board of Governors chairs the FOMC meeting.

The FOMC typically meets eight times a year in Washington, D.C. At each meeting, the committee discusses the outlook for the U.S. economy and monetary policy options.

Federal Reserve Funds are the overnight lending rate at which banks borrow reserves from each other. The Federal Funds Rate is sensitive to changes in the demand for and supply of reserves in the banking system and thus provides a good indication of the availability of credit in the economy.

The Federal Reserve’s three Monetary Policy Instruments are Open Market Operations, the Discount Rate, and Reserve Requirements.

Inflation is a sustained increase in the general level of prices, which is equivalent to a decline in the value or purchasing power of money. If the supply of money and credit increases too rapidly over time, the result could be inflation.

Monetary Policy refers to what the Federal Reserve, the nation's central bank, does to influence the amount of money and credit in the U.S. economy. What happens to money and credit affects interest rates (the cost of credit) and the performance of the U.S. economy.

Open Market means that the Fed doesn’t decide on its own which securities dealers it will do business with on a particular day. Rather, the choice emerges from an “open market” in which the various securities dealers that the Fed does business with – the primary dealers – compete on the basis of price.

Open Market Operations involve the buying and selling of government securities. The term Open Market means that the Fed doesn’t decide on its own which securities dealers it will do business with on a particular day. Rather, the choice emerges from an “open market” in which the various securities dealers the Fed does business with – the primary dealers – compete on the basis of price. Open Market Operations are flexible, and thus, the most frequently used tool of monetary policy.

Reserve Balances with Federal Reserve Banks is the amount of money that depository institutions maintain in their accounts at their regional Federal Reserve Banks.

The Cryptocurrencies and the CBDC need to be added to the tally of payments made by the intermediary banks in order for the Federal Reserve to calculate a correct Reserve Balance each bank needs to maintain overnight. So far, the Cryptocurrency payments have not had much of an impact on this calculation, but it is a matter of time before it does start having an impact. The adoption of a U.S. CBDC will definitely have an impact.

There is a fine line between collecting information about consumer transactions used to calculate the Reserve Balance for each bank and transgressing the required privacy requirements. See section 4.4 National Privacy Considerations.

See P0018 - The Federal Reserve Act does not authorize direct Federal Reserve accounts for individuals. If it is amended to allow these accounts, then how will a Reserve Balance be calculated for the Federal Reserve commercial bank?

CBDC payments would be similar to the current non-cash payments done with debit cards, credit cards, electronic transfers, and checks. This has to be reported in order for the banks to calculate the Reserve Balance required by the Federal Reserve to banks. There is no reason that U.S. CBDC could not be treated similarly.

The general public can already make digital payments using non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks

If the CBDC is treated like other non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks, there should be no reason to have an extra layer of protective insurance for CBDC.

Thes transactions should be treated similarly to non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks. However, if a Stablecoin is used, then the transactions might be settled within minutes depending on the Consensus Algorithm used in the Stablecoin. See OMG DIDO-RA Consensus Algorithms), answer to B0025 below, and R0010 - CBDC has Risk of significant energy footprint similar to Cryptocurrencies.

The CBDC could offer another mechanism to the existing non-cash mechanisms such as debit cards, credit cards, electronic transfers, and checks. However, in order to offer real-time settlements, it may need to use a different mechanism than the existing Automated Clearing House (ACH) Network currently in use to electronically move money between banks accounts across the U.S. The current ACH network is run by an organization called Nacha, formerly the National Automated Clearing House Association (NACHA).

There definitely would need to be a bridge between the existing ACH-NACHA payment network and a U.S. CBDC, its associated Consensus Algorithms, and the network of nodes. However, in addition to the bridge between the two, there probably needs to exist a new consolidated frontend ( Application Programming Interface (API)?) that abstracts the type of payment from the participants in the transactions. In other words, the transaction should be agnostic to non-cash mechanisms such as debit cards, credit cards, electronic transfers, checks, and CBDC.

See the answer to B0026 above. CBDC should be treated like any other payment form, even though under the hood, it might use a different payment network than the National Automated Clearing House Association (NACHA) network.

See answers to B0025, B0025 and B0029 above.

By defining a new standardized Application Programming Interface (API) as in B0026 above, a marketplace of products can be developed by the private sector to help innovate the current payment ecosystem.

This is currently almost impossible with Credit and Debit cards because the cost of a transaction is so high that a vendor might lose money supporting small payments, let alone micropayments. A parallel network used by the CBDC might alleviate this problem depending on the Consensus Algorithm used by the U.S. CBDC.

As an example:

You knew when you opened your merchant account that you’d have to pay for credit (and debit) card processing, but $0.15 or $0.20 per transaction (in addition to the percentage charge) didn’t seem like it would be a big deal. Unfortunately, a lot of your customers come in and only buy a single item, maybe something for $3.00 or less. They don’t carry any cash and want to use their credit card. However, your margins are so thin on low-priced items that the fixed per-transaction fee you pay for processing can wipe out your profit. In fact, you might even lose money on some sales if the customer uses a credit card.⁵⁾

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 permits businesses to impose a minimum purchase amount of up to \$10 for credit card use, but the minimum must be the same for all credit card issuers and payment card networks. Part of this legislation, the Durbin Amendment, contains the following provision:

(3) NO RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS.–A payment card network shall not directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to set a minimum or maximum dollar value for the acceptance by that person of any form of payment.

See answers to B0011, B0018, B0020, B0024, B0025, B0026 above.

Sales taxes are already collected by the merchant at the point of sale.

The Internal Revenue Service (IRS) uses third-party payment processors for payments by debit and credit card. It's safe and secure; your information is used solely to process your payment. ⁶⁾

1. You can pay online or over the phone (see Payment Processor Contact Information below for phone payments)

2. You can pay using digital wallets such as PayPal and Click to Pay

3. There’s a maximum number of card payments allowed based on your tax type and payment type

4. Employers’ federal tax deposits cannot be paid by card; see how to pay employment taxes

5. For card payments of $100,000 or more special requirements may apply

Each state and local jurisdiction has different rules.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0004.

Regardless of how the U.S. CBDC is implemented, for example Stablecoin, the Consensus Algorithms need to include all the rules outlined in sections 4.4 National Privacy Considerations, 4.5 National Security Considerations, and 4.6 International Considerations.

In other words, consensus includes the enforcement of the laws and regulations concerning Monetary Policy.

The easiest solution is to allow current intermediaries to process CBDC transactions using an upgraded payment system.

See answer B0025, B0026, B0029, B0038, B0040 above.

The easiest solution is to allow current intermediaries to process CBDC transactions using an upgraded payment system.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

This would require standardization ( Application Programming Interface (API)?) that each intermediary would use to transfer money. The interface could be in the form of Web Services, Remote Procedure Calls (RPC), Common Object Request Broker Architecture (CORBA), Data Distribution Service (DDS) or other interprocess communication mechanisms defined using ISO/OMG Interface Definition Language (IDL), Web Services Interface Language (WSDL), etc.

See answer to P0012 above.

The Federal Open Market Committee (FOMC) is interested in the Reserve Balances of financial institutions within the U.S. There, if the transaction has one end of the transaction as a U.S. institution, then the ID of the individuals in the transaction is required.

See answers to B0024 and B0025 above.

See answers to B0024 and B0025 above.

See answers to B0025, and B0025 above.

See answer to B0003 above.

See answer B0025, B0026, B0029, B0038, B0040 above.

From a Monetary Policy perspective, only the Reserve Balances is important. As long as the Reserve Balances account for Cryptocurrency and U.S. CBDC balances there should be little impact on the Monetary Policy.

The only reason to use the U.S. CBDC Stablecoin over U.S. Dollars is the potential for faster transactions using the CBDC transactions than in traditional ACH transactions. This would mean that before a transaction is to begin, the money in U.S. Dollars (or other currency) would be transferred to U.S. Stablecoins and the transaction would be conducted in Stablecoins. Once the transaction is completed, the Stablecoins could be changed quickly for U.S. Dollars. The only reason to hold onto the Stablecoins is to conduct more transactions using the Stablecoin network.

This would vary greatly from the current way the Credit Cards, Debit Cards, and Checks currently work. These are backed by accounts that can receive interest. For example, debit cards and checking accounts can pay interest on positive balances. These checking accounts cond maintain separate balances for U.S. Dollars and for Stablecoins. But since Stablecoins would be backed by U.S. Dollars anyway, it seems a bit of a moot point unless the value of the U.S. Dollar and the U.S. Stablecoins are allowed to diverge.

See answers to B0025, and B0025 above.