Fed Vice Chairman Lael Brainard put off the dreams of investors waiting for the digital dollar, saying it would likely take up to five years to create a central bank digital currency (CBDC) in the United States.
Brainard, in his first speech to the House of Representatives Financial Services Committee after his inauguration ceremony to take over the position of vice chairman of the board of directors, said that the Fed is still working on this issue and will not act without approval from the White House and Congress.
“Security and Design Process May Take Five Years”
In his speech, Brainard stated that the digital dollar will take a long time. Brainard likened this project to the real-time payment system that the Fed worked for years to build and is still incomplete:
“It could take up to five years to get the necessary safety features, design features in place.”
Brainard also addressed concerns that the banking industry will lose its own profits and said that the digital dollar system will likely be a digital currency that does not yield interest.
In addition, the Fed vice chair said that limits could be placed on the amount of digital dollars investors can have to encourage a digital dollar to only mediate payments and not as an investment vehicle.
Brainard cryptocurrencies He also talked about.
“Digital Dollars and Stablecoins Can Be Used Simultaneously”
Brainard said that if the Fed launches a digital dollar, this asset could coexist with stablecoins and the current financial system:
“I see the potential for the digital dollar to be a kind of complement to stablecoins and commercial bank coins and create a more stable, efficient system. I also think that these will also mediate private sector innovation.”
Brainard confirmed that CBDC assets and transactions will continue to be managed through private sector accounts and not directly in client accounts at the Fed.
The Fed vice president also talked about the potential harms for the United States from not issuing a CBDC. According to Brainard, with the emergence of such an alternative in regions such as Europe, the title of the global reserve currency of the US dollar may decrease.
*Not investment advice.