The Federal Reserve vice chairwoman has been calling for strong crypto regulation while arguing that a U.S. central bank digital currency.
President Joe Biden has named a strong proponent of a digital dollar and effective crypto regulation as his top economic adviser.
The White House announced on Feb. 14 that Federal Reserve vice chair Lael Brainard will be director of the National Economic Council, making her responsible for advising the president on U.S. and global economic policy and coordinating economic policy making across federal agencies.
Brainard "brings an extraordinary depth of domestic and international economic expertise," President Biden said. "She is a trusted veteran across our economic institutions, and understands how the economy affects everyday people."
Strong Guardrails
She has also called for "strong regulatory guardrails" for crypto finance as soon as possible. She said:
"It is important that the foundations for sound regulation of the crypto financial system be established now before the crypto ecosystem becomes so large or interconnected that it might pose risks to the stability of the broader financial system."
Those regulations should reflect "the principle of same risk, same disclosure, same regulatory outcome" for crypto and traditional finance.
Digital Dollar is Vital
As vice chair of the Fed, Brainard has been a consistently stalwart advocate of a U.S. central bank digital currency, or CBDC.
Citing the U.S. dollar's "dominant" position in international payments as the world's de facto reserve currency, Brainard said back in August 2021 "if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn't have one, I just, I can't wrap my head around that." She added:
"That just doesn't sound like a sustainable future to me."
With more than 100 countries investigating CBDC — China's built one, India's committed to doing so and the European Central Bank is pushing hard for a digital euro — Brainard warned that Congress could find itself telling the Fed, "you need to catch up."
Assuaging Fears
She has also been leading the charge to assuage the fears of the leading opponents of a digital dollar: Retail banks.
Worried that during economic crises people would be tempted to pull deposits out of bank accounts and put them into government-guaranteed CBDCs, the industry-funded Bank Policy Institute said in May that a digital dollar "would undermine the commercial banking system in the United States, and severely constrict the availability of credit to the economy."
That is something the government would take into account when designing a digital dollar, Brainard responded, saying a CBDC "wouldn't diminish deposits in the banking system" or "impede [the] important functions of a vibrant banking system."
One way to do that, she said, would be to offer no interest on CBDC holdings.
