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Fed's Brainard: Can't wrap head around not having U.S. central bank digital currency

EconomyJul 30, 2021 10:30PM ET
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© Reuters. FILE PHOTO: Federal Reserve Board Governor Lael Brainard speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., March 1, 2017. REUTERS/Brian Snyder

By Ann Saphir

(Reuters) - Federal Reserve Governor Lael Brainard on Friday laid out a range of reasons for "urgency" around the issue of developing a U.S. central bank digital currency, including the fact that other countries such as China are moving ahead with their own.

"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," Brainard told the Aspen Institute Economic Strategy Group. "That just doesn't sound like a sustainable future to me."

Fed officials are taking a deep dive into the digital payments universe, collecting public feedback on the potential costs and benefits as well as design considerations with a view to publishing a discussion paper in early September.

Fed Chair Jerome Powell in comments earlier this month described the analysis as a key step in accelerating the Fed's efforts to determine if it should issue its own CDBC.

"One of the most compelling use cases is in the international realm, where intermediation chains are opaque and long and costly," Brainard said on Friday.

But there are domestic reasons too for a U.S.-backed digital currency, she said: the dramatic rise in stablecoins, a form of cryptocurrency pegged to a conventional currency such as the U.S. dollar but not backed by any government.

Stablecoins could proliferate and fragment the payment system, or one or two could emerge as dominant, she said. Either way, "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, she suggested, including the difficulty during the pandemic of getting government payments to people without bank accounts, who also tend to be the very people who need the payments the most.

Fed's Brainard: Can't wrap head around not having U.S. central bank digital currency
 

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Comments (7)
JAMES CUNHA
JAMES CUNHA Aug 01, 2021 11:09AM ET
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I can't wrap my head around the Fed continuing to put off the decision to taper its asset purchases.
Investing Man
Investing Man Jul 31, 2021 3:12PM ET
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We gave a digital dollar. Its called a debit card
Kaveh Sun
Kaveh Sun Jul 31, 2021 11:32AM ET
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We cant wrap our head around Why is hold a high position with that many # in her.
Alan Rice
Alan Rice Jul 31, 2021 11:32AM ET
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English ??
Yankee Steve
Yankee Steve Jul 31, 2021 7:23AM ET
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CBDC is about control and power. The Fed is not going to give that up. Once you go to CBDC you can go to negative interest rate becauss there will be no bank run. What are you going to take out? 0 and 1 to put it under your mattress? They have been saying big noted us for launderer and then they blamed crypto. You see where this is going? It is in the constitution Article I, Section 8, Clause that silver and gold is money.
Ernie Keebler
Ernie Keebler Jul 31, 2021 4:52AM ET
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The fed has to push out a digital currency it’s the only way to stabilize the lock the rich have on the wealth of the world
William Bailey
William Bailey Jul 31, 2021 1:20AM ET
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Fed cooked
Eudon Hickey
Eudon Hickey Jul 31, 2021 1:06AM ET
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Well, the chinese people dont like the chinese digital currency.
 
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