Fed report shows digital dollar could have impact on balance sheet

On January 21, the Federal Reserve’s central bank digital currency report showed that a future digital dollar could have a significant impact on the size of the balance sheet. The Federal Reserve's report released on Thursday said the rollout of a digital dollar could affect and depress bank reserves. “In the longer term, the Fed may have to expand the size of its balance sheet to accommodate the growth of central bank digital currencies (CBDCs), similar to the balance sheet impact of issuing more and more physical money,” the report said. A number of factors are changing, but some economists have said that the Fed's currency could cause the Fed's balance sheet to continue to grow very large, although the exact size is unclear.