Here’s something that might perk up crypto junkies. Federal Reserve board member Lael Brainard has said that the Fed is currently taking a serious look into central bank digital currencies.
Speaking at a symposium at the Stanford Graduate School of Business, Brainard spoke heavily about the digitalization of payments and currencies, from the convenience digital payments has provided to current calls for central banks to issue digital currencies.
Citing a recent survey by the Bank of International Settlements (BIS), Brainard pointed out that over 80% of central banks are doing some sort of central bank digital currency (CBDC) work, and that there is greater openness to issuing a CBDC today than there was a year ago, with a few central banks actually forging ahead with them.
Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding CBDC. Like other central banks, we are conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC.
That said, Brainard went on to unpack all the potential implications a U.S.-backed CBDC would face, from privacy and regulatory issues to legal and financial considerations. She noted that while “the legal framework is well-established with regard to the rights and protections for Federal Reserve notes in the current system,” she said that it remains untested for instruments such as CBDCs and other digital currencies, adding that a different approach may be best to help CBDC holders keep their rights.
She ended her speech saying:
While the potential for seamlessly integrated and lower-cost transactions brings important benefits, digitalization also brings risks. In the United States no less than in other major economies, the public sector needs to engage actively with the private sector and the research community to consider whether new guardrails need to be established, whether existing regulatory perimeters need to be redrawn, and whether a CBDC would deliver important benefits on net.
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