Federal Reserve Governor Lael Brainard: The United States needs to have a CBDC

Federal Reserve Governor Lael Brainard said the United States needs to have a digital dollar when other countries are racing to issue their own central bank digital currencies (CBDC), according to Reuters.

Federal Reserve Governor Lael Brainard

“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 United States doesn’t have one, I just, I can’t wrap my head around that. That just doesn’t sound like a sustainable future to me,” Brainard told the Aspen Institute Economic Strategy Group on Friday.

The governor said the proliferation of stablecoins could fragment the payment system without a digital dollar. A digital dollar could also help people without bank accounts to get government aid such as pandemic relief payments.

CBDC is the digital form of a fiat currency of a nation or territory and is issued and regulated by the competent monetary authority of that country. Theoretically, CBDC creates a new digital mechanism to solve the problem of real-time transferring of money between two parties, thus helping international transactions to happen easily without intermediate steps like in traditional bank transactions.

China started to research and development of a CBDC, called e-CNY in 2014 and has yet to announce an official launch date. But it is ahead of many other major economies that are still exploring the idea of ​​a digital currency, including Japan, Korea, Singapore, Nigeria, the US, the UK, Sweden, Thailand, and Vietnam.

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