Creating an official US digital dollar could speed up payments and provide households with a safe option as payments technology evolves — but it would also present financial stability risks and privacy concerns, according to the Federal Reserve.

The central bank released a long-awaited discussion paper on Thursday, but it made no policy recommendations and offered no clear signal on where the Fed stands on whether to launch a central bank digital currency, or CBDC. The Fed also said it would not proceed “without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”

Still, it sets the stage for the central bank to collect public feedback on the potential costs and benefits of the approach, which is being increasingly explored by major economies across the globe.

“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 in the report.

Challenges include maintaining financial stability and making sure the digital dollar would “complement existing means of payment,” the Fed said. The central bank also needs to tackle major policy questions before embarking on a CBDC, such as making sure it does not violate Americans’ privacy and that the government maintains its “ability to combat illicit finance.”

How a digital dollar might work

Even while making no recommendations, the paper did shed some light on how a CBDC might function in practice.

A key finding of the analysis was that a CBDC would “best suit” US needs if it were “intermediated” through the current financial system, meaning individuals would not have CBDC accounts directly with the Fed. Still, Fed officials said they are not ruling anything out.

The paper, which was announced by Fed Chair Jerome Powell last year, summarizes the payment landscape, including the emergence of stablecoins and other cryptocurrencies. Comments on the issue will be accepted for 120 days.

“The paper is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a US CBDC,” it says.

Powell has made it clear he would like such a project to have broad support and to ideally be the product of congressional action. The Fed board is generally divided on the need for a CBDC.

Unlike cryptocurrencies, which are typically run by private actors and can see volatile price swings, a CBDC would be issued and backed by the central bank. It also differs from the electronic cash transactions that happen daily now through large commercial banks in that it could give consumers a direct claim to the central bank, similar to physical cash.

The paper released Thursday is separate from research the Boston Fed has been working on with the Massachusetts Institute of Technology to explore the technological aspects of a CBDC. That technical research, including coding that could be used for a potential US CBDC, will be released as early as next month.

The Fed’s report comes as about 90 countries, from the Bahamas to China, explore or launch their own central bank digital currencies, according to research from the Atlantic Council.