The US Federal Reserve governor has argued that The United States must be at the forefront of developing a central bank-backed digital currency, or CBDC, to bolster the role of the US dollar as a global reserve currency. Federal Reserve Governor Lael Brainard has asserted that leading CBDC projects could have a “significant effect” on the global financial system, urging the US to ensure it plays a leading role in the burgeoning CBDC ecosystem.
“US needs to be ahead in the CBDC race.”
The US Fed governor said in the announcement, “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 the cross-border standard.” The announcement further noted that the Fed is “sharpening its focus” on four key areas of CBDC development — “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.”
“Covid-19 pandemic has accelerated the migration to digital payments.”
The Federal Reserve governor offered some of the potential benefits to adopting launching a CBDC, asserting the covid-19 pandemic had “accelerated the migration to digital payments” among US households and noting that it took “weeks” for prepaid debit cards to be distributed as a relief to households that did not have up-to-date bank information filed with the Internal Revenue Service. 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,” she added.