After Federal Reserve Chairman Jerome Powell stated that the central bank was in no rush to issue a central bank digital currency (CBDC), Fed Governor Lael Brainard says they are in fact stepping up research into a CBDC.
Governor of the Federal Reserve Brainard has begun to press harder for a digital dollar after chairman Jerome Powell stated the Fed was in no rush to roll out a CBDC. In a speech on Monday, Brainard said that a central bank-backed cryptocurrency could provide numerous benefits to all parties involved.
Providing financial services to the nearly 20% of “underbanked” American citizens is one of the major advantages Brainard spoke about in a crypto conference this morning. Brainard also cited the safety of a federally backed system, along with the evolution of efficiency and cross-border payments. This would ease the stress of transactions between people in different countries considerably.
A shift to contactless payments
While Brainard underlined the importance of continuing with caution, she believes the covid-19 epidemic increased the need for a system that would give access for a wide range of individuals to regulated digital money. An example of this would be the many citizens who did not receive their relief payments, due to not having a bank account or an account with incorrect information as per the Internal Revenue Service.
Brainard believes that, with a CBDC, those people would have gotten their money deposited and gotten it faster.
“In the United States, the pandemic has accelerated the transition to digital payments and increased cash demand. While the use of cash surged at certain times, consumers and businesses have made a significant shift to contactless payments driven by electronic payments,” Brainard said in a statement and added:
“The Federal Reserve continues to promise that people have access to safe, reliable, and secure payment methods, including cash,” Brainard continued. “As part of this effort, we need to investigate and predict the extent to which household and corporate needs and preferences may move further into digital payments over time.”
The push by Brainard toward a CBDC is propelled by her desire to help grant access to electronic currencies to consumers. The broader access to cryptocurrencies has been popularized with the use of bitcoin (BTC) and its ever-growing list of competition. Chinas central bank has been moving forward with its own CBDC project, along with other countries worldwide.
Recently, the Boston Fed and MIT launched a collaborative project to set up hypothetical models. Several other Fed districts are also conducting research of their own, with similar goals in mind. The FedNow service, which is a planned payment system that would resemble digital dollars in some ways is expected to launch in 2023.