A member of the US Fed board of governors has hinted that the institution welcomes the plan of central bank digital currency than earlier.
Lael Brainard, who chairs multiple Fed committees, gave her opinion during a talk at a seminar conducted at the Stanford Graduate School of Business regarding the payments in the time to come.
In her speech, Brainhard said the Fed was “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC (central bank digital currency).”
Brainhard pointed to a recent poll conducted by the Bank for International Settlements (BIS) disclosing that as of January 2020, 80% of central banks across the globe are currently involved in some kind of CBDC related work. The reported figure is up from 10% in the earlier year.
Considering the greenback’s prominent role in international markets, Brainhard contended that it is crucial for the Fed to stay “on the frontier of research and policy development regarding CBDC.”
Unique digital remittance system, currency and settlement tools are spreading, she highlighted, isolating Facebook’s Libra venture and China’s upcoming digital yuan as crucial advancements in the private and public sector across the globe.
Brainhard, for two times in succession, described the likely function of CBDCs as ensuring a sovereign currency to remain the linchpin of a country’s payment network.
Even though she did not openly extend the argument to an international level in case of the US dollar, whose core function stretches outside nation-state boundary, she pointed out the likely effect of new private and public endeavors.
“For smaller economies, there may be material effects on monetary policy from private-sector digital currencies as well as foreign central bank digital currencies. In many respects, these effects may be the digital version of ‘dollarization,’ with the potential for a faster pace and wider scope of adoption.”
Brainhard, one-and-a-half years ago, had spoken in Digital Currency Conference held at San Francisco as follows:
“there is no compelling demonstrated need for a Fed-issued digital currency.”
Initiatives such as Libra have given rise to demands for Fed to speed up the launch of its upcoming real-time, 24×7 payments and settlements facility, “FedNow.”
Even though “FedNow” does not involve a complete CBDC (Central Bank Digital Currency), the facility is structured to pave way for clients and businesses to handle their finance more adaptably and finish time-dependent payments beyond traditional banking hours.
