FOMC member Lael Brainard said the United States must “accelerate the development of the digital dollar without delay.” Reuters reported.
Speaking at the Aspen Institute’s Economic Strategy Group, she noted that other states are rushing to issue a central bank digital currency (CBDC):
“The dollar dominates international payments, and if there are other large jurisdictions in the world with a CBDC while the United States does not have one, I simply cannot wrap my head around it. To me, this does not look like a sustainable future.”
She sees the international arena, where “the intermediary chains are opaque, long, and costly,” as the main arena for applying the digital currency.
Another internal reason Brainard cited for issuing a CBDC is the potential spread of stablecoins.
According to her, such assets, not backed by any government, could proliferate and fragment the payments system.
“In a world of stablecoins, with heavy migration into them, you can imagine that households and businesses simply lose access to safe settlement assets backed by the government. And that, undoubtedly, is what the currency has always provided,” Brainard said.
In her view, CBDCs could also help address other problems, including pandemic-related difficulties in obtaining government assistance for people without bank accounts. Typically this segment of the population is the most in need of subsidies, the economist noted.
Earlier, members of the House committee on National Security, International Development, and Monetary Policy expressed concerns about China’s leadership in CBDC development.
However, Fed Chair Jerome Powell previously stated that for the United States it is more important to get the digital currency right than to be first. In January, he called regulating stablecoins a priority for the agency.
Fed Vice Chair Randal Quarles is confident that authorities need to find a way to integrate these assets into the financial system, while questioning the necessity of a CBDC.