Fed Governor Lael Brainard Says That the US Should Lead In Research On CBDCs

During a Consensus Speech held on Monday, the Federal Reserve Governor, Lael Brainard, shared her views on CBDCs and the potential risks of implementing privatized finance.

Governor Lael said that the United States has been showing a significant amount of interest in the development of international transaction standards in regards to the use of CBDCs. These standards will certainly help in handling certain effects that CBDCs will have worldwide because there are several risks that private money can have, so it is important to keep them in mind.

Taking a look over at China, the People’s Bank of China has been experimenting with its own CBDC, mainly called the eCNY, which is expected to be released alongside the 2022 Winter Olympics. Governor Lael highlighted this development and said that the Federal Reserve is studying the development of the project with a great deal of interest so that it can act accordingly when U.S-based CBDCs come into action.

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Furthermore, Governor Lael said that it is very important that the United States must be actively present in the development of internal standards regarding digital currencies. The United States is already working with a number of forums and communities to maintain the importance of the United States Dollar worldwide, so it is very vital that the United States must remain upfront in the research and policy development regarding CBDCs.

Stablecoins not the Solution

When asked about it, Brainard questioned stablecoins, saying that it is not so simple to fix the doubts that surround digital currency. Brainard said that if stablecoins were used, there are a lot of risks involved, including system fragmentation, financial stability, and use protection. Brainard continued to warn about the issues that are present in the use of stablecoins, speculating that it would bring the free banking era back, which can cause massive financial instability.

Many reports have indicated that the Boston Fed has been in partnership with MIT, the International Settlements Bank, and a variety of others in the research and development of a test CBDC. The details regarding this certain CBDC are said to be released by the Fed in the form of a white paper. Moreover, multinational company Accenture is also working on its own digital currency solution, but there is no information about its backing.