Federal Reserve Governor Lael Brainard, has highlighted the urgency around the development of the digital dollar.
Speaking to the Aspen Institute Economic Strategy Group on Friday, Brainard stated: “The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC (central bank digital currency) offering, and the U.S doesn’t have one, I just, I can’t wrap my head around that,” according to the Reuters.
Brainard’s statement comes as the Fed is gathering public feedback on potential costs and benefits of issuing U.S CBDC. It will Publish a discussion paper in early September that will cover design aspects.
Brainard went through various reasons to find a need for a digital dollar. “One of the most compelling use cases is in the international realm, where intermediation chains are opaque and long and costly,” Brainard said.
Stablecoins could proliferate and fragment the payment system, or one or two could emerge as dominant, she said.
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“In a world of stablecoins you could imagine that households and businesses, if the migration away from currency is really very intense, they would simply lose access to a safe government backed settlement asset, which is of course what currency has always provided.”
A CBDC could also help solve other problems. Brainard suggested, “including difficulty during the pandemic of getting government payment to people without bank accounts, who also tend to be the very people who need the payment the most.”
