Fed’s Brainard: US Needs CBDC For International Use Cases

Lael Brainard, governor of the Federal Reserve, has said there are a myriad of reasons to begin developing a central bank digital currency (CBDC), Reuters reported.

“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 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, per Reuters. “That just doesn’t sound like a sustainable future to me.”

As China has begun moving forward with a digital currency, the weight of the decision seemed important, according to Reuters. So, Fed officials have begun looking more into the CBDC world. They’ve begun taking public feedback on the topic, including costs and benefit analyses.

But the Fed, thus far, doesn’t know whether it will issue its own CBDC, Reuters reported.

Brainard said there would be some good reasons to do it in the U.S., including a drastic rise in stablecoin use, which could end up fragmenting the payment system and resulting in one kind of payment emerging as dominant, according to Reuters.

Brainard said, per Reuters, that could result “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.”

PYMNTS reported that a U.S. CBDC could make it so that the U.S. dollar maintains its prominence around international markets, according to Robert M. Baldwin, head of policy for the Association for Digital Asset Markets.

He said the reasons the dollar has become so ubiquitous in the global scene, accounting for over 60 percent of transactions around the world, is “strong rule of law and dynamism.” He said the modernization of the payments scene should come with consumer-friendliness, benefiting domestic customers but also working for international business.