The Vice-Chair of the United States Federal Reserve, popularly called the Fed, Lael Brainard, discussed cryptocurrencies and the creation of the digital version of the U.S. Dollar. She believes that the creation of a central bank digital currency or CBDC is very important and beneficial as cryptocurrencies developed by other nations become increasingly popular.
Future digital financial system and CBDC
As per a testimony released before Brainard’s appearance before the U.S. House of Representatives Financial Services Committee on Thursday, Brainard believes that the Fed needs to act immediately and that “there are risks of not acting, just as there are risks of acting.”
“As we assess the future digital financial system, it is prudent to consider how to preserve ready public access to safe central bank money, perhaps through the digital analog of the Federal Reserve’s issuance of physical currency,” Brainard’s testimony said.
Currently, the Fed and the lawmakers remain divided on the need for a CBDC. However, the Fed Vice-Chair confirmed that no decision would be taken without the approval of Congress. She further added that there are potential risks to rolling out a CBDC as well, one of them being disintermediating banks, given their “critical role in credit provision, monetary policy transmission, and payments.”
Stablecoin is another target for the Fed
Stablecoins have become one of the biggest issues for regulators recently after the crash of UST or Terra USD, an algorithmic stablecoin developed by Do Kwon. The Fed Vice-Chair believes that such events “underscore the need for clear regulatory guardrails to provide consumer and investor protection, protect financial stability, and ensure a level playing field for competition and innovation across the financial system.”
“In addition, if private monies—in the form of either stablecoins or cryptocurrencies—were to become widespread, we could see fragmentation of the U.S. payment system into so-called walled gardens,” read the testimony.
Post a Comment