Chief among the reasons the U.S. needs to have a digital dollar is that other countries are racing to issue their own central bank digital currencies (CBDC), Federal Reserve Governor Lael Brainard said on Friday, Reuters reported.
Speaking at the Aspen Institute Economic Strategy Group, Brainard said, “The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that,” according to the Reuters report.
Earlier this month, Fed Chair Jerome Powell told a House committee a Fed report on CBDCs would come in early September as the central bank decides on the merits of issuing a digital dollar. Meanwhile, China is in the testing stage of its own CBDC.
Closer to home, Brainard said the proliferation of stablecoins could fragment the payment system without a digital dollar, according to the report.
A digital dollar could also help people without bank accounts to get government aid such as coronavirus pandemic relief payments, Reuters quoted the Fed governor as saying.
Separately, Brainard said she doesn’t see any signs that currently high inflation readings are pushing longer-term inflation expectations above the central bank’s 2% target.