Lael Brainard, governor of the U.S. Federal Reserve says the Fed is considering the possibility of creating a sovereign digital currency for the country.
Brainard’s statement comes as several nations are reportedly moving forward with plans to launch their own central bank digital currency (CBDC).
Meanwhile, mainstream finance stakeholders continue to warn about the dangers of private digital currency projects like Libra. Since the publishing of the white paper for Facebooks’ Libra, several central banks appear to have stepped up efforts in the virtual currency space.
US Needs to be a Leader in the Digital Economy
According to Bloomberg, Brainard spoke at the Stanford Graduate School of Business School on Wednesday (February 5, 2020) highlighting the need for the U.S. to remain a leader in digital innovation. Commenting on the possibility of a sovereign digital currency for the U.S., the Fed governor remarked:
“Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding central bank digital currency, or CBDC. We are conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC.”
Brainard’s comments echo those of Heath Tarbert, the chair of the U.S. Commodity Futures Trading Commission (CFTC) who in November 2019 called on the country to lead the rest of the world in crypto adoption.
Initial Caution Giving Way to Serious Considerations
For Brainard, the Fed is moving away from initial caution and skepticism surrounding CBDCs into more serious considerations about launching a ‘crypto dollar.’
The Fed governor pointed to the growing interest around CBDCs with the involvement of international financial establishments like the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) offering views on the matter in recent times.
According to the IMF, central banks should be open to the possibility of creating their own CBDCs. BIS for its part has warned countries not to allow private cryptos to gain a foothold in their local economies.
Brainard also highlighted the Libra countermeasure angle, saying:
“Because Facebook has an active user network of one-third of the global population, the company’s Libra global stablecoin project has imparted urgency to the debate over what form money can take, who or what can issue it, and how payments can be recorded and settled.”
More Countries Join the CBDC Race
While the U.S. reportedly moves into the studying phase of CBDC development, other countries are ramping up efforts to launch their own sovereign digital currencies.
A recently established CBDC think tank composed of central banks of Canada, Switzerland, Japan, Sweden, the UK, as well as the European Central Bank (ECB), and BIS is set to hold its inaugural meeting in April 2020.
The scheduled meeting will take place during an IMF conference in Washington. Members of the think tank plan to work together, sharing ideas on how to develop CBDCs. As previously reported by Blockonomi, CBDC is becoming a big topic in Asia with many central banks releasing statements on the matter.
Japan, one of the members of the CBDC coalition has said it has no plans to issue a ‘digital yen.’ However, deputy governor of the Bank of Japan, Masayoshi Amamiya remarked earlier in January that Japan must be ready to issue its own CBDC at the shortest notice.
Japan’s CBDC efforts might come as a way of competing with China, especially as Beijing is reportedly making “smooth progress” with its own CBDC plans. Meanwhile, South Korea’s central bank has come out to say that a “digital Won” is unlikely.