The US must win the CBDC race to maintain the status of the dollar’s global reserve currency: Federal Reserve Governor

585
SHARES
3.2k
VIEWS


The Fed’s governor has argued that the United States must be at the forefront of developing a central bank-issued digital currency (CBDC) to bolster the US dollar’s role as a global reserve currency.

In an announcement made May 24, US Federal Reserve Governor Lael Brainard stated that leading CBDC projects could have “significant effects” on the global financial system and called on the US to ensure it played a leading role in the burgeoning CBDC -Ecosystem plays:

You might also like

“Given the potential for CBDCs to become more prominent in cross-border payments and the role of the dollar in the reserve currency, it is vital for the United States to be at the forefront in developing the cross-border standard.”

The announcement notes that the Fed is “sharpening” its focus on four key areas of CBDC development – “the growing role of digital private money, the migration to digital payments, plans to use foreign CBDCs in cross-border payments, and concerns about financial exclusion. “

The governor offered some of the potential benefits of introducing a CBDC. He claimed the Covid-19 pandemic had accelerated the migration to digital payments in US households, noting that it took “weeks” for prepaid debit cards to be distributed as a relief to households where no up-to-date banking information with the Internal was made Revenue Service were deposited.

“We need to investigate and try to anticipate the extent to which household and business needs and preferences may shift to digital payments over time,” she added.

Brainard also highlighted potential risks related to the widespread adoption of private stable coins, suggesting that a CBDC could provide the benefits and benefits associated with existing USD stable tokens without undermining government control over monetary policy.

“In contrast to central bank fiat currencies, stablecoins have no legal tender status[,] There is a risk that the widespread use of private funds for consumer payments will fragment parts of the US payments system, adding burdens and increasing costs to households and businesses, ”she said.

“In any evaluation of a CBDC, it is important to be clear about the benefits a CBDC would offer beyond current and emerging payment options, the costs and risks a CBDC could bring, and how this might affect broader policy objectives.”

On May 20, Federal Reserve Chairman Jerome Powell announced that the Fed would prepare a paper that will discuss the benefits and risks of CBDC.