Federal Reserve Vice Chairwoman Lael Brainard said a central bank digital currency (CBDC) could coexist with stablecoins and provide a measure of safety. Brainard's comments were part of testimony released ahead of her appearance before the Financial Services Committee on Thursday.
- "CBDCs could coexist with and complement stablecoins and commercial bank money by providing a secure central bank liability in the digital financial ecosystem, similar to how cash currently coexists with commercial bank money," Brainard wrote.
- She also wrote that thoughtful regulation is needed in light of the recent collapse of TerraUSD (UST) and Tether. "The rapid evolution of the digital financial system nationally and internationally should lead us to frame the question not as whether there is a need for a central bank-issued digital dollar today, but rather whether there may be conditions in the future that could create such a need," Brainard said. "We know there are risks to not trading, just as there are risks to trading.
- Brainard also addressed the potential for a CBDC to facilitate global payments and how the U.S. can serve as an example of digital finance with "privacy, accessibility, interoperability and security."
- For its part, the Federal Reserve has recently solicited comments on the advisability of establishing a CBDC. Wall Street bankers have expressed concerns that a U.S. CBDC could disrupt the banking system, while Circle, the issuer of the USDC stablecoin, said a government-owned stablecoin could displace tokens from the private sector.
- Fed officials have routinely said the U.S. central bank does not intend to move forward with a CBDC without the support of the president and Congress.