Fed Reserve Governor Says US Must Win CBDC Race to Preserve Dollar’s Status

The Fed Reserve Governor has recently raised concerns over the United States winning the CBDC race in order to maintain the role of the digital dollar as a global reserve currency. Lael Brainard asserted in an announcement made on May 24 that the leading CBDC projects could have a notable effect on the global financial system urging the United States to make sure it plays a leading role in the expanding CBDC ecosystem.

Fed Reserve Governor Says the US Should win CBDC race 

As revealed in the announcement, the emphasis on the potential of Central Bank Digital Currencies (CBDCs) was laid and the announcement said:

“Given the potential for CBDCs to gain prominence in cross-border payments and the reserve currency role of the dollar, it is vital for the United States to be at the table in the development of cross-border standards.”

In addition to this, the announcement noted that the Federation is planning to sharpen its focus on four major areas of the development of CBDC and said:

“The growing role of digital private money, the migration to digital payments, plans for the use of foreign CBDCs in cross-border payments, and concerns about financial exclusion.”

Lael Brainard, the Governor offered some of the potential advantages to adopting the launch of a Central Bank Digital Currency, asserting the coronavirus pandemic had escalated the migration to digital payments.

Potential Risks of Worldwide Adoption of Stablecoins

Brainard focused on the need to shift to digital payments and released a statement that said:

“We must explore—and try to anticipate—the extent to which households’ and businesses’ needs and preferences may migrate further to digital payments over time.” 

Emphasizing the worldwide usage risk for consumer payments, she added:

“Unlike central bank fiat currencies, stable coins do not have legal tender status[,] there is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. payment system in ways that impose burdens and raise costs for households and businesses.”