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“American digital currency” is a broad phrase, not one universal U.S. legal category. It can refer to digital forms of dollar value, such as an electronically recorded bank deposit, or to non-fiat digital value such as cryptocurrency. A central bank digital currency (CBDC) is narrower: it would be digital money that is a direct liability of the Federal Reserve and broadly available to the public. The Federal Reserve says it has made no decision to pursue or implement a U.S. CBDC.
What does “digital currency” mean in the United States?
The answer depends on context. In its sanctions guidance, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) says digital currency includes sovereign cryptocurrency, non-fiat virtual currency, and digital representations of fiat currency. OFAC’s definition is useful as a broad description, but it applies to its sanctions context rather than serving as a single definition for every U.S. law or agency.
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OFAC defines virtual currency as digital value that functions as a medium of exchange, unit of account, and/or store of value, and is neither issued nor guaranteed by a jurisdiction. That can include some cryptocurrencies, but it does not describe every kind of digital money. OFAC FAQ 559 was last updated October 15, 2021.
Is there a U.S. digital dollar?
The term “digital dollar” can mean different things. Bank balances and digital payment services already let people move dollar-denominated value electronically, but that does not make them a Federal Reserve digital currency. A U.S. CBDC would be a distinct form of central-bank money: the Federal Reserve describes a CBDC as a digital liability of a central bank widely available to the public. The Fed says it has made no decision about whether to pursue or implement one. Federal Reserve CBDC overview
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A preliminary U.S. Code page contains a statutory definition of a CBDC as a digital asset denominated in U.S. dollars, a U.S. currency, a direct Federal Reserve liability, and widely available to the public. That page also includes CBDC-related provisions whose practical legal status can change. It is marked preliminary, so consult the current Code and agency statements before relying on it for a legal conclusion. Office of the Law Revision Counsel, preliminary U.S. Code §423
How digital dollars, bank deposits, payment apps and CBDCs differ
| Category | Who owes or issues the value? | What it means |
|---|---|---|
| Commercial-bank deposit | The commercial bank | A dollar-denominated bank balance recorded electronically. It is a bank liability, not a Federal Reserve liability. |
| CBDC | The Federal Reserve | A digital form of central-bank money intended to be broadly available to the public. The Fed has made no decision to pursue or implement one. |
| Virtual currency or cryptocurrency | Varies; OFAC’s virtual-currency definition excludes value issued or guaranteed by a jurisdiction | Digital value that can function as a medium of exchange, unit of account, or store of value. Cryptocurrency uses cryptography to secure transactions recorded on a distributed ledger such as a blockchain. |
| Digital payment service | The underlying money remains a liability of its issuer | A way to transfer or settle value electronically, not necessarily a new kind of currency. |
The Federal Reserve’s 2022 discussion paper distinguishes commercial-bank deposits from a CBDC by liability: a bank balance is owed by the bank, while a CBDC would be owed by the Federal Reserve. The paper discussed potential benefits and risks; it was not a decision to issue a CBDC. Federal Reserve, “Money and Payments: The U.S. Dollar in the Age of Digital Transformation”
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FedNow is a payment service, not a currency
FedNow is an instant-payment service offered to banks and credit unions. It is not a currency or an individual consumer account service, and using an electronic payment rail does not turn a bank deposit into a CBDC. Federal Reserve FedNow FAQ
What does “virtual currency” mean for taxes?
The IRS uses a narrower definition for federal tax guidance. It describes virtual currency as digital value other than a representation of the U.S. dollar or foreign currency that functions as a unit of account, store of value, and medium of exchange. The IRS calls cryptocurrency a type of virtual currency that uses cryptography to secure transactions recorded on a distributed ledger such as a blockchain.
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The IRS says virtual currency is treated as property for federal income-tax purposes under Notice 2014-21 and related tax principles. However, the IRS FAQ’s applicability note says it generally covers digital-asset transactions completed before January 1, 2025. For a later transaction, check current IRS guidance for the relevant tax year rather than assuming that this FAQ settles the question. IRS virtual-currency FAQ
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Where do stablecoins fit?
A dollar-backed payment stablecoin is a private-money category, distinct from a Federal Reserve CBDC. The Congressional Record includes proceedings concerning the GENIUS Act, but those proceedings alone do not establish the final current statutory definitions, effective dates, or implementing rules. Do not infer an issuer’s eligibility, reserve requirements, or redemption obligations without consulting the enacted law and current agency regulations. Congressional Record, Senate proceedings, June 5, 2025
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How to tell what someone means by “American digital currency”
- Ask who owes the money. It may be a bank, the Federal Reserve, a private issuer, or no government issuer or guarantor.
- Identify what the value represents. It might be central-bank money, a bank deposit, a digital representation of fiat currency, or non-fiat value.
- Separate money from the payment method. An app or payment rail can move value without creating a new currency.
- Check the context of the definition. An agency’s sanctions, tax, payments, or central-bank policy definition may not apply in the same way elsewhere.
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