Brainard says US role in CBDC development is 'vital' as the Fed widens its R&D efforts
May 24, 2021, 9:51AM EDT
2 min read
The Federal Reserve is expanding its work on central bank digital currencies, with a particular focus on financial and geographical inclusion.
Lael Brainard, who sits on the Fed's Board of Governors, spoke at Consensus 2021 on Monday morning. Brainard has been the public face of the Fed's work on developing a CBDC, which was the focus of her recent remarks.
"Given the potential for CBDCs to gain importance in cross-border payments and reserve currency roles, it's vital for the United States to be at the table in developing standards," said Brainard.
Underlying these concerns is China's development of a CBDC. Coindesk's Michael Casey asked Brainard: "Is the China factor in play in terms of how quickly the US should be moving towards a new digital money?" Brainard answered that any development in cross-border payments "does potentially have effects across the globe," which she said included but was not limited to China.
The role of other private stablecoins and their ability to compete with the extant U.S. payments system was also a critical theme of Brainard's remarks. As she has in the past, Brainard promoted the value of public rather than private money, referring to the system of private bank money that preceded the development of the Federal Reserve. If private stablecoins come to dominate payments, Brainard said: "There's a real risk that you could see fragmentation of the payments system and you could see financial protection and stability risk."
Brainard noted that new initiatives at the Federal Reserves of Atlanta and Cleveland were aimed at researching the geographical and financially inclusive nature of a potential digital dollar.
"The Federal Reserve Bank of Atlanta is launching a public–private sector collaboration as a Special Committee on Payments Inclusion to ensure that cash-based and vulnerable populations can safely access and benefit from digital payments," Brainard said. "This work is complemented by a new Federal Reserve Bank of Cleveland initiative to explore the prospects for CBDC to increase financial inclusion. The initiative will identify CBDC design features and delivery approaches focused on expanding access to individuals who do not currently use traditional financial services."
Per her account, the Fed will also be putting out a white paper next quarter and seeking public comment on proposals for a coming CBDC.