The Vice Chair of the U.S. Federal Reserve Lael Brainard, on May 26 defended the idea of having a U.S. central bank digital currency (CBDC) in front of the Congress. She defended CBDCs in a hearing about the advantages and risks of having a CBDC.
She said that a CBDC can exist simultaneously with stablecoins and give a measure of safety. Brainard’s statements were part of a testimony issued in advance of her appearance in front of the House Financial Services Committee.
Brainard wrote, “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.”
She also wrote that thoughtful regulation is required in regards to the latest collapse of stablecoin 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 commented.
“We recognize there are risks of not acting, just as there are risks of acting.”
Also Read: US Congressman Proposes Bill to Prevent Fed from Issuing CBDC.
Brainard also recognised the potential of a CBDC to simplify worldwide payments, and how the U.S. can be an example in digital finance with “privacy, accessibility, interoperability, and security.”
Currently, the Federal Reserve is seeking comments on the advisability of creating a CBDC. Some Wall Street bankers have shown concerns that a U.S. CDBC can potentially undermine the banking system. However, the issuer of the USDC stablecoin, Circle, stated that a federal stablecoin might crush private-sector tokens.
The Federal Reserve officials have frequently said that the U.S. central bank is not intending to move forward on a CBDC without the backing from the president as well as the Congress. However, earlier this year the Bank of America said US CBDC is ‘inevitable’ so it is certain that the government will take a step in that direction soon.
