The entity is stepping up its research in fields such as cross-border payments from foreign central banks and the potential benefits for financial inclusion.
The Federal Reserve is stepping up its research on digital currencies, Governor Lael Brainard said, amid growing demand for digital payments.
Brainard noted that three other issues – the growing role of private digital money, plans to use digital currency for cross-border payments from foreign central banks, and the potential benefits for financial inclusion – have sharpened the Fed’s focus on the digital currency of the United States. central bank.
Brainard, who is the governor in charge of financial stability at the Fed, has seen bitcoin and other digital assets become investment vehicles over the past year, raising questions about how the Fed and regulators would address the issue. rival money.
She was critical of stablecoins and other assets not backed by regulatory oversight. Last week, cryptocurrencies plunged into volatile trading as China announced it would crack down on mining due to financial risk and after Tesla said it would no longer accept payments in bitcoin.
“New forms of private money can introduce counterparty risk into the payments system in new ways that could lead to consumer protection threats or, on a large scale, broader financial stability risks. The design of any central bank digital currency should complement and not replace the currency and bank accounts, ”Brainard said Monday in a virtual speech prepared for a cryptocurrency conference.
Brainard said the pandemic accelerated the use of so-called contactless payment methods and said a Fed digital dollar could provide “competition” in US retail payments.
“Given the potential for central bank digital currencies to gain prominence in cross-border payments and the reserve currency of the dollar, it is vital for the US to participate in the development of cross-border standards,” Brainard said.
