A member of the Federal Reserve Board of Directors has indicated that the institution is more open to the idea of digital currency from the central bank than before.
Lael Brainard – chairman of various Fed committees – made her comments during a speech at a symposium on the future of payments at the Stanford Graduate School of Business on February. 5.
In her speech, Brainhard said the Fed “conducted research and experimentation on distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC (digital currency of the central bank).”
Brainhard cited a recent survey by the Bank for International Payments, which showed that from January 2020, 80% of central banks worldwide are engaged in some form of CBDC work. That figure is 10% higher than last year.
Given the important role of the dollar in the global market, Brainhard argued that it is essential that the Fed “stay on the line of CBDC research and policy development”.
New digital payment, currency, and settlement tools are now growing, she noted, as the Facebook Libra project and China’s upcoming Chinese yuan heralded as crucial developments in the private and public sector worldwide.
Twice in her speech, Brainhard defined the potential role for CBDCs as maintaining a sovereign currency as the anchor of the payment system of a certain nation.
And although she did not explicitly extrapolate this argument to a global scale in the case of the US dollar – whose key role extends far beyond the borders of national states – she noted the potential impact of new private and public projects:
“For smaller economies, there may be material effects on the monetary policy of digital currencies in the private sector and digital currencies of foreign central banks. In many ways, these effects can be the digital version of “dollarization,” with the potential for a faster pace and broader acceptance. “
Less than 18 months ago, Brainhard had told a digital currency conference in San Francisco that “there is no compelling need for a digital currency issued by the Fed.
Developments such as Libra have also called on the Fed to accelerate the rollout of its upcoming real-time, 24/7 payment and settlement service, “FedNow”.
Although not a fully-fledged CBDC, the service is intended to enable consumers and businesses to manage their funds more flexibly and to complete time-sensitive payments outside of regular bank hours.