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Lael Brainard, Federal Reserve's vice-chair, presented a written statement about the benefits of CBDC and the role of stablecoins in the near future

Fed Vice chair speaks about the potential of CBDCs and the future of stablecoins

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Image: Shutterstock[br]U.S. Federal Reserve’s vice-chair Lael Reserve presented a paper titled ‘On the Benefits and Risks of a U.S. Central Bank Digital Currency (CBDC)’ in advance of the Financial Services Commission’s (FSC) virtual hearing scheduled for Thursday. The paper submission just before the virtual hearing is being regarded as a sound strategic move by the vice-chair, given that over 25 legislators were to ask questions in the hearing. Brainard appeared before the committee after the comment period on the Fed’s discussion paper ‘Money and Payments: The U.S.Dollar Age of Digital Transformation’ came to a close. Brainard positively acknowledged the role of stablecoins though the recent happenings in the stablecoin market impacted her outlook. She stated, “In some future circumstances, CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money.&quot;During the question and answer session Brainard threw some great insights into the kind of regulations needed to ensure the stability of stablecoins. She said there was a need for a ‘very robust regulation akin to bank-like regulation’ for stablecoin while conversing with Anthony Gonsalez of Ohio. The other questions touched upon during the Q&amp;A were the role banks would play and whether their role would be diminished even if the financial system was not disintermediated and how bringing in a CBDC would impact the current financial situation. The participants pressed Brainard on one of the statements written in the discussion paper. The statement said, “The Federal Reserve does not intend to proceed with issuing a CBDC without clear support from the executive branch and Congress, ideally in the form of a specific authorising law.&quot; The committee members, including Jake Auchincloss of Massachusetts,’ were interested in knowing the non-ideal options the Fed would consider for CBDC issuance. Regarding CBDCs, Brainard suggested putting limits on CBDC holdings and not allowing interest on CBDC accounts could be two ways via which the place of credit unions in the economy could be preserved, and the role of traditional banking be maintained. Brainard explained further that CBDCs would help ease fragmentation of the payment system via interoperability. CBDCs would act as a settlement currency for private sector systems which already draw money out of the banking system. Brainard told Ted Budd of North Carolina that the share of cash in the US economy has declined from 31 percent in 2017 to 20 percent currently. CBDC would have complete faith in the government behind it and would help reduce the share of cash transactions in the US economy further. Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash 

Raquel del Rio, 36, who works in police forces, poses as she observes a period calendar tracker app on her mobile phone at her home in Madrid, Spain, May 16, 2022. Spain has become the first Western country to move to give menstrual leave, with a draft bill unveiled by the government on May 17 giving women unlimited leave for period pain, provided they have a doctor"s note. (Credits: Isabel Infantes/ Reuters)

Fed Vice chair speaks about the potential of CBDCs and the future of stablecoins

Lael Brainard, Federal Reserve's vice-chair, presented a written statement about the benefits of CBDC and the role of stablecoins in the near future

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