U.S. Federal Reserve Vice Chair Lael Brainard said that a central bank digital currency (CBDC) could exist alongside stablecoins and provide a measure of safety. Brainard’s comments were part of testimony released in advance of her appearance in front of the House Financial Services Committee on Thursday.
- “CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money,” Brainard wrote.
- She also wrote that thoughtful regulation is necessary given the recent collapse of terraUSD (UST) and luna (LUNA). “The rapid ongoing evolution of the digital financial system at the national and international levels should lead us to frame the question not as whether there is a need for a central-bank-issued digital dollar today, but rather whether there may be conditions in the future that may give rise to such a need,” Brainard said. “We recognize there are risks of not acting, just as there are risks of acting."
- Brainard also addressed the capabilities of a CBDC to facilitate global payments, and how the U.S. can serve as an example in digital finance with “privacy, accessibility, interoperability, and security.”
- For its part, the Federal Reserve has been soliciting comments recently on the advisability of setting up a CBDC. Wall Street bankers have expressed concerns that a U.S. CDBC could disrupt the banking system, while Circle, the issuer of stablecoin USDC, said a federal stablecoin might squash private-sector tokens.
- Fed officials have routinely said the U.S. central bank doesn’t intend to move forward on a CBDC without backing from the president and the Congress.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.