WATCH: US-backed digital currency could cohabit with some cryptocurrencies
A Federal Reserve-issued digital currency could be implemented alongside stablecoins — cryptocurrencies meant to be pegged to a less volatile currency or commodity, Board of Governors Vice Chairman Lael said Thursday. Brainard.
Watch the event in the player above.
“In certain future circumstances, [Central Bank digital currency] could co-exist and be complementary to stablecoins and commercial bank currency by providing secure central bank accountability in the digital financial ecosystem, just as cash currently co-exists with commercial bank currency,” Brainard said before a House finance committee hearing.
LOOK: Yellen calls for new regulations amid crypto decline
Brainard noted that other countries and central banks have already started piloting digital currencies, including China and Europe. She said the Federal Reserve issuing digital currency could ensure that US currency will still be used in the future.
“More generally, it is important that the United States play a leadership role in developing standards governing international digital financial transactions involving CBDCs, consistent with privacy, accessibility, interoperability, and security standards. “Brainard said.
Brainard told the committee that the “recent turmoil” in crypto markets has shown that actions, such as a new regulatory framework or the rollout of a “digital dollar,” need to be considered.
“The rapid and continued evolution of the digital financial system domestically and internationally should lead us to ask the question not whether there is a need today for a central bank-issued digital dollar, but rather whether whether there may be conditions in the future that could give rise to such a need,” Brainard said.
Stablecoins have been considered a safe haven among cryptocurrencies. This is because the value of many stablecoins is tied to a government-backed currency, like the US dollar, or to precious metals like gold.
There has been a lot of talk about cryptocurrency regulation, but little action.
Treasury Secretary Janet Yellen, responding to the volatility in the crypto markets, said the United States needs a regulatory framework to guard against the risks associated with cryptocurrencies and stablecoins.
In March, Federal Reserve Chairman Jerome Powell said new forms of digital currency such as cryptocurrencies and stablecoins posed risks to the US financial system and would require new rules to protect consumers. Just before the Terra implosion, the Fed said in its semi-annual Financial Stability Report that stablecoins were vulnerable to “runs” that could harm the owners of the coins.
Securities and Exchange Commission Chairman Gary Gensler says the crypto industry is “filled with frauds, scams and abuses” and his agency needs more authority from Congress – and more funding – to regulate the market.