Fed Governor: Widespread of Private Monies Could Fragment US Payment System
Main page News, US Market, CBDC, Stablecoins, Regulations

Federal Reserve Governor, Lael Brainard, says the adoption of private monies like stablecoins could "fragment parts" of the US payment system. In a speech to a conference by CoinDesk, Brainard also said that global adoption of stablecoins may pose a threat to financial stability due to their volatility.

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"A predominance of private monies may introduce consumer protection and financial stability risks because of their potential volatility and the risk of run-like behavior," she said.

Moreover, Brainard emphasized the importance for the United States to be "at the table in the development of cross-border standards" for central bank digital currencies (CBDC).

"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."

Brainard also said that a digital dollar would be a "new type of central bank money" issued in digital form. A CBDC would reduce counterparty risk and the associated consumer protection and financial stability risks, Brainard highlighted.

Fed and MIT to Unveil Digital Dollar Prototypes by July

Brainard's comments come after the Fed announced it is going to reveal this summer a discussion paper on the possibility of issuing a US CBDC. The Fed Chair, Jerome Powell, said that the key focus so far is on whether and how a CBDC could improve on an already "safe, effective, dynamic, and efficient US domestic payments system." He also said that CBDC could serve as a complement to, and "not a replacement of," fiat money.

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