The United States’ Federal Reserve is studying the feasibility of issuing a digital currency, FED Governor Lael Brainard revealed on Wednesday.
Speaking at a conference on payments at the Stanford Graduate School of Business, Brainard said: “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].”
“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.”
Her statement came as multiple leading central banks are studying the feasibility to issue a digital currency, thus minimizing the dominance of the US dollar in global trade.
“By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost,” she said, mentioning the benefits of digital currency.
Facebook’s attempt to launch Libra also raised the alarm among the regulators about the privatizations of the monetary system.
“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,” Brainard added.
She also pointed out that the monetary regulator needs to study several prospects, including the cost reduction measure of CBDC and the possibility of any operational vulnerability, the categorization of banks and financial institutions offering the digital currency, and also the stability risks associated with such step.
In a recent report, the Bank for International Settlements and the International Monetary Fund have also asked the central banks to at least study the feasibility of issuing a digital currency.
“These are some of the issues that would need to be addressed before deciding to issue a CBDC in the United States,” she said.