US Fed Vice Chair Says Digital Dollar Would Take 5 Years to Launch
The Federal Reserve’s Lael Brainard says it will take years to build a U.S. CBDC and that the project can only start once Congress and the White House sign off.
Federal Reserve Vice Chair Lael Brainard issued a reality check on those awaiting a digital dollar, saying that creating a central bank digital currency (CBDC) in the U.S. would likely take as long as five years.
In Brainard’s first testimony after her recent swearing-in ceremony to take over the Fed board’s vice chair role, she told the House Financial Services Committee that the Fed is still studying the question and wouldn’t move before approval from the White House and Congress – which in itself could add a considerable period of debate before an authorizing law can be passed.
“It takes a long time,” Brainard said in a Thursday hearing, comparing such a project with the Fed’s still incomplete real-time payments system that has taken years to build. “It could take five years to put in place the requisite security features, the design features.”
As to those design features, Brainard said it’s “probably preferable not to have an interest-bearing digital currency," answering some bankers’ concerns that a digital dollar could take a massive and potentially fatal bite out of their deposit business. She also mentioned the Fed is considering caps on digital dollar holdings to encourage customers to use them only for payments and not as a safe asset for people or businesses to pile their money into.
If the Fed does launch a digital dollar, Brainard said the asset could coexist with stablecoins and the existing financial system.
“I really see the potential for a digital dollar as being complementary to a more stable, efficient system that would include stablecoins and commercial bank money, so I really see them potentially enabling private sector innovation,” she said. CBDC holdings and transactions would still be managed through private sector accounts, Brainard confirmed, and not at direct customer accounts at the Fed.
Brainard said letting other central banks issue digital analogues to cash – such as in Europe – could eventually degrade the U.S. dollar as the global reserve currency, leaving “potential risks to not having a CBDC” in the U.S.
Longtime Fed governor Brainard was recently sworn in as vice chair alongside a few other additions to the board, but the Fed is still absent its vice chair for supervision. Biden nominated former Treasury official Michael Barr, who also worked for a time as an adviser to centralized fintech company Ripple, to take that role, but he's still awaiting a Senate confirmation vote.
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.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.