Federal Reserve Vice Chairman Lael Brainard believes that the digital dollar will strengthen the position of the US state currency against the backdrop of the development of cryptocurrencies and digital currencies of other central banks.
Speaking before the House Financial Services Committee, Lael Brainard statedthat a thorough assessment of the current financial system is needed to ensure the country’s financial stability.
In addition to the rapid adoption of cryptocurrencies in payments, about 87 central banks are exploring the possibility of launching government stablecoins, with some central banks already actively testing. Therefore, the Fed should accelerate the issuance of the digital equivalent of the US dollar in order to maintain free public access to money. Launching a digital dollar comes with a lot of risks, Brainard said, as does inaction.
Unlike private cryptocurrencies, the digital dollar will be issued and controlled by the Central Bank. The state stablecoin should be designed in such a way that commercial banks retain their leading role in the financial system, acting as intermediaries between clients and the Central Bank. Banks should be able to set limits on how digital dollars can be transacted or held, Brainard said.
U.S. politicians continue to disagree on the advisability of launching a digital dollar. Recently, public discussions of the state cryptocurrency were completed, which lasted for three months. However, the Fed said earlier that it would not launch a digital dollar without the support of the White House and most lawmakers. Brainard is convinced that the deployment of the Fed’s digital currency will strengthen the value of the dollar on the global stage.
Brainard mentioned the situation with the algorithmic stablecoin UST and the LUNA coin, as well as the depreciation of bitcoin by more than 50% since November. She stressed the need for clear regulations to protect traders and investors, which would ensure a level playing field for competition and innovation in the financial sector.
However, US Federal Reserve board member Christopher Waller is more skeptical about government cryptocurrencies. He believes that many dollar transactions are conducted digitally and without the launch of a digital dollar, which could violate user privacy. According to Waller, private stablecoins can better serve as a digital currency.
Source: Bits
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