Lael Brainard, a member of the Federal Reserve’s board of governors, encouraged the United States to be a leader in research and policy regarding central bank digital currencies, or CBDCs, due to potential international developments.
In remarks prepared for the U.S Monetary Policy Forum in New York on Friday, Brainard said the People’s Bank of China’s pilot program for its digital yuan could have implications on the dollar’s dominance in cross-border payments and payment systems. However, a digital dollar could allow people around the world to continue to rely on its fiat counterpart.
“It is prudent to consider how the potential absence or issuance of a U.S. CBDC could affect the use of the dollar in payments globally in future states where one or more major foreign currencies are issued in CBDC form,” said Brainard. “A U.S. CBDC may be one potential way to ensure that people around the world who use the dollar can continue to rely on the strength and safety of U.S. currency to transact and conduct business in the digital financial system.”
While China is making its CBDC available to international visitors for the Winter Olympics, the U.S. still seems to be in the exploratory phase of rolling out a digital dollar. During her time at the Fed, Brainard has often spoken in favor of the U.S. issuing a CBDC given the dominance of the fiat dollar in international payments.
Brainard, nominated to be the next vice chair of the Federal Reserve, is currently awaiting to be confirmed by the Senate along with chairperson Jerome Powell, prospective board members Lisa Cook and Philip Jefferson, and vice chair for supervision Sarah Bloom Raskin. On Tuesday, Republican lawmakers blocked a committee vote on the Fed officials, leaving three vacant positions on the board.
The prospectiv Fed vice chair also cited a CBDC development project from the Federal Reserve Bank of Boston and the MIT Digital Currency Initiative, and the research from the New York Innovation Center, an initiative aimed at exploring technology used to develop the global financial system. The former recently released the results of a test run for the digital currency.
“These technology research and development initiatives are vital to our responsibilities to promote a safe and efficient payment system and financial stability, whatever the future may bring,” said Brainard.