Federal Reserve Governor Warns U.S. Cannot Fall Behind In CBDC Race
Crypto News

Federal Reserve Governor Warns U.S. Cannot Fall Behind In CBDC Race

2 Minuten
2 years ago

Lael Brainard said that the rapid growth of private stablecoins and the threat of foreign CBDCs cutting into U.S. economic power are serious.

 Federal Reserve Governor Warns U.S. Cannot Fall Behind In CBDC Race


Federal Reserve Governor Lael Brainard warned that the U.S. cannot afford to fall behind in the race to establish a central bank digital currency.
Speaking at the Consensus by CoinDesk conference, Brainard said she was concerned by the both the growth of private stablecoins and the reality that other countries are far ahead of the U.S. in creating a CBDC.
Private stablecoins like Tether, USD Coin, and the forthcoming Libra got a big step up late last year, when then-Comptroller of the Currency Brian Brooks allowed banks to use stablecoins to settle transactions.

Along with exposing consumers and businesses to risk, Brainard warned of a threat to the dollar’s position as the world’s reserve currency, which brings enormous economic influence.

“Unlike central bank fiat currencies, stablecoins do not have legal tender status,’

“If widely adopted, stablecoins could serve as the basis of an alternative payments system oriented around new private forms of money,” Brainard said. “[T]here is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. payment system in ways that impose burdens and raise costs for households and businesses.”

Because they do not have legal tender status, she added, private stablecoins could “expose consumers and businesses to risk.”

China’s Huge CBDC Lead

On the international side, she noted that “some foreign countries have chosen to develop and, in some cases, deploy their own CBDC.” While she did not specifically mention China by name, she was clearly referring to Beijing’s readiness to issue a digital yuan, having run many tests over the past year.

“The issuance of a CBDC in one jurisdiction, along with its prominent use in cross-border payments, could have significant effects across the globe,” she added. “Given the potential for CBDCs to gain prominence in cross-border payments and the reserve currency role of the dollar, it is vital for the United States to be at the table in the development of cross-border standards.

Beyond these competitive threats, Brainard noted that the pandemic had accelerated consumers’ adoption of digital payments, and that a CBDC could be good news for unbanked and underbanked Americans, who are hit by high costs for financial transactions.

8 people liked this article