Lael Brainard was a member of Federal Reserve’s Board of Governors. He encouraged the United States, due to international developments, to lead in research and policy on central bank digital currencies (or CBDCs).
Brainard stated that the People’s Bank of China’s pilot program to create a digital yuan for cross-border payments could have implications for the dominance of the dollar in these areas. A digital dollar may allow people to continue to rely upon its fiat counterpart around the globe, however.
Brainard stated that it is prudent to think about how the possible absence of a U.S. CBDC or its issuance could impact the use of the Dollar in international payments in states where one or more major foreign currency are issued in CBDC form. A U.S. CBDC could be one way to ensure that all people who use the dollar around the globe can continue to trust the safety and strength of the U.S. currency when transacting and conducting business in the digital financial market.
Lael Brainard addresses members of the Senate Banking Committee, February 3, 2013.
China has made its CBDC accessible to international visitors as part of the Winter Olympics. However, the U.S. seems to still be in the exploratory stage of launching a digital currency. Brainard, who served as Fed Chair, has frequently advocated for the U.S. issuing CBDC due to the dominance and power of the fiat currency in international payments.
Brainard, who was nominated as the next vice-chair of the Federal Reserve is currently awaiting confirmation by the Senate. He is also expected to be joined by Jerome Powell, chairperson, and potential board members Lisa Cook, Philip Jefferson, and Sarah Bloom Raskin, vice-chair for supervision. Three board positions were left vacant after Republican lawmakers stopped a vote in committee on Tuesday regarding Fed officials.
Related: A bill is proposed by a US lawmaker to limit the Fed’s ability issue CBDC
A CBDC development project by the Federal Reserve Bank of Boston, the MIT Digital Currency Initiative and research from New York Innovation Center were also mentioned by the Fed vice chair. This initiative aims to explore technology that can be used in the development of the global financial system. The results of a digital currency test were released by the former.
Brainard stated that technology research and development initiatives are essential to our responsibilities in order to ensure a safe, efficient payment system and financial stability.