Fed kicks off debate on issuing its own digital currency with new white paper

The paper made no policy recommendations and offered no clear signal on where the Fed stands on whether to launch a central bank digital currency (CBDC), a digital form of cash in your pocket.

The paper tiptoes around a subject that has sparked debate inside the Fed's top ranks, even as other central banks across the globe are exploring the adoption of digital currencies.

"While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides," Fed officials wrote.

Challenges include maintaining financial stability and making sure the digital dollar would "complement existing means of payment," the Fed said.

Unlike cryptocurrencies, which are typically run by private actors, a CBDC would be issued and backed by the central bank.

The central bank will collect comments on the issue via an online form for 120 days.

Others, including Fed Governor Christopher Waller, are more skeptical and point out that many dollar transactions are already digital.