On Wednesday, US Treasury Assistant Secretary Nellie Liang gave a speech about the future of money and payments, including a possible digital dollar. Ms. Liang said the Treasury would consider the option of providing access to a wholesale Central Bank Digital Currency (CBDC) to non-bank financial institutions, which could include stablecoin issuers.

As part of the CBDC decision-making process for retail and wholesale CBDCs, Treasury is considering how they differ from current central bank reserves in terms of technology and access.

Regarding technology, wholesale CBDCs are likely to be tokenized rather than account-based, as central bank digital money is already available today. Token-based CBDCs, which involve blockchains, facilitate on-chain payments and support features like 24/7 payments, atomic settlement, and some degree of programmability.

With respect to access, the default would be for wholesale CBDCs to only be accessible to financial institutions eligible for central bank accounts. But Ms Liang hinted that this could include a broader range of financial intermediaries. However, she said, “that decision would be an independent choice, rather than a necessary consequence of having a wholesale CBDC.”

In her speech, Ms. Liang also noted that wholesale CBDCs could become reliable assets to back stablecoins, where reserves are currently held mainly in Treasury bonds and bank deposits. A stablecoin could put pressure on a bank and disrupt Treasury markets if it lost its peg and experienced a run. Therefore, a wholesale CBDC could be an ideal solution for reservations.

Other potential wholesale use cases mentioned included brokerage payments for tokenized bank deposits, securities settlement, and cross-border payments.

The talk also highlighted other important issues. For example, he confirmed the creation of an interagency working group led by the Treasury Department to advance work on CBDCs. Furthermore, Ms. Liang stressed that the Federal Reserve would consult Congress before any decision to issue a CBDC. Lastly, the Under Secretary reflected on some of the broader policy implications of a US CBDC, including how it could support its global financial leadership; contribute to strengthening privacy, security and financial inclusion; and countering national security risks, particularly relevant given the prospects that foreign CBDCs could lessen the effectiveness of sanctions and other financial measures.