Is the U.S. ready for a digital dollar? Not just yet, Federal Reserve Governor Lael Brainard said in a speech at CoinDesk’s Consensus 2021 on Monday (May 24).
There are a few policy considerations to tackle first, Brainard said, such as upholding access to “safe central bank money” payment and clearing efficiency, complementing bank deposits, increasing financial inclusion and protecting privacy and financial stability. The rise of digital currency and private money are helping to fuel an increased interest in a central bank digital currency (CDBC,) she said.
“I do believe that in the context where we maintain the role of safe central bank money as a foundation for the payment system, there’s a lot of room for competition and innovation to flourish,” said Brainard.
She praised innovations in the field, but added that the regulatory framework needs to evolve with the currency and must be shared across agencies. She went on to say that the United States needs to create the standards around cross-border payment systems. “I do think some cryptocurrencies are very different, in some cases, from more traditional financial assets,” she said.
Brainard also warned that the rise of private money could ultimately harm the American payment system, leading to rising costs for businesses and consumers. She compared this to the unregulated banking days of the 1800s, in which private companies issued their own currency. “It is not obvious that new forms of private money that reference fiat currency, like stablecoins, can carry the same level of protection as bank deposits or fiat currency,” she said.
Brainard’s comments came just days after Fed Chairman Jerome Powell called for greater input on digital currency. “As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system,” he said in a video posted last week. “In pursuit of these core functions, we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance and banking.”
Read more: https://www.pymnts.com/cryptocurrency/2021/fed-governor-us-has-cbdc-hurdles-to-clear/
