US Fed Vice Chair Appears Before Legislative Financial Committee, Speaks on CBDC

UTC by Tolu Ajiboye · 3 min read
US Fed Vice Chair Appears Before Legislative Financial Committee, Speaks on CBDC
Photo: Fortune Live Media / Flickr

The US central bank’s vice chair suggested that a CBDC is necessary for financial evolution, but might take a while to materialize.

According to US Fed Vice Chair Lael Brainard, the country’s central bank digital currency (CBDC) could take as much as five years to launch. Brainard also added that the digital dollar project can only kick off once Congress and the White House sign off.

Speaking to the House Financial Services Committee in her first testimony following her recent swearing-in ceremony, Brainard said the CBDC would take “a long time”. She specified that the required design and security features could take five years to put in place.

Furthermore, Brainard stated that the US central bank is still studying the intricacies involved in launching a CBDC. Although she said Executive approval is necessary to initiate anything, she admitted that waiting for this approval could also take additional time.

US Fed Vice Chair CBDC, Stablecoin Comparison

Brainard’s appearance before the House Financial Services Committee closely followed the comment period for the Fed’s discussion paper titled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation”. In advance of her virtual hearing before the committee, Brainard had submitted a written statement on CBDC benefits and risks. This set the tone and prepped the legislators for an enlightening session. Brainard’s written statement touched on stablecoins, which has become a buzz topic following the recent events in the marketplace. Establishing a relationship between stablecoins and CBDCs, the Fed Vice Chair explained:

“In some future circumstances, CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money.”

Doubling down on her opinion, Brainard also stated:

“I really see the potential for a digital dollar as being complementary to a more stable, efficient system that would include stablecoins and commercial bank money, so I really see them potentially enabling private sector innovation.”

The central bank’s vice chair explained that private sector accounts would manage CBDC holdings and transactions instead of Fed direct customer accounts.

The Importance of a Digital Dollar

In the ensuing Q&A session with lawmakers, Brainard covered a wide range of related topics. The range included bank-like regulation of stablecoins and the fragmentation of the payment system. In addition, legislators wanted to know how a CBDC would affect the situation. To this, Brainard said that a digital dollar would offer stability and interoperability in an increasingly complex economic and financial ecosystem.

Furthermore, Brainard also hinted at the potential global ramifications of the US not having a CBDC. According to her, European central banks issuing CBDCs could threaten the dollar as the global reserve currency. This would leave “potential risks to not having a CBDC” in the US.

Committee Chair Maxine Waters also spoke on the benefits Americans get from having a globally-accepted currency and the “digital assets space race”.

Cryptocurrency News, News
Related Articles