• Lael brainard, vice president of Federal Reserve, stated that the future U.S. dollar might be available alongside fixed-coins.
• The official discussed the need to consider the issue of a CBDC in order to maintain the dominance and power of the dollar in international trade during a meeting with Washington legislators.

Despite the recent crisis unleashed upon the market by TerraUSD, the United States Federal Reserve appears to be softening its stance on stablecoins, according to statements by the body’s vice president, Lael Brainard, on Thursday.

An official stated that private stablecoins may one day exist alongside digital dollars, because central bank digital currencies could be used to help secure global payment networks.

Brainard spoke out during a Washington meeting of lawmakers to highlight the importance of the administration’s consideration of how the potential presence of a U.S. CBDC on the market could affect global dollar payments.

“In some future circumstances, CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money,” Brainard said.

The risk of fragmentation in the payment system

In her comments, the Fed representative highlighted the “explosive growth” of the emerging digital financial system. Additionally, she stated that, if more private cryptocurrency, such as stablecoins is used, then the U.S. payments system may become less efficient.

Brainard was invited by the House Financial Services Committee to testify on the crash of TerraUSD, which brought down the cryptocurrency market, raising serious concerns within Congress and in the White House.

Brainard’s four-year appointment as deputy chairman of the U.S. central bank was confirmed last month by the Senate.

“The recent turmoil in crypto financial markets makes clear that the actions we take now—whether on the regulatory framework or a digital dollar—should be robust to the future evolution of the financial system,” the official warned.

The CBDC guarantees the dollar’s use around the world

Without taking any position, the Fed released an extensive report in January about the potential benefits and dangers of issuing U.S. dollars digitally.

In her prepared remarks, Brainard suggested consideration of how issuing or non-issuing of a U.S. CDDC would affect the use of the dollar in the global payment system, given the currency’s current dominance in international trade.

Brainard stated that a U.S. CBDC could be an option to make sure people who use the US dollar to transact in and out of digital financial systems can still rely on its strength and safety.

Flipside

• U.S. cryptocurrency firms are intensifying lobbying in Washington after the Terra-Luna disaster. They want to stop lawmakers and the government cracking down on all stablecoins.

What You Need to Care About

• Lael Brainard made clear that the future of the US dollar as the world’s leading currency is in danger by issuing a CBDC.

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