Fed Vice Chairman Lael Brainard said that central bank cryptocurrencies (CBDC) benefits and stablecoins can wreak havoc. The statements come at a time when the Terra ecosystem is dragging the altcoin market.
Lael Brainard will highlight that these altcoin projects are “useful”
Fed Vice Chairman Lael Brainard plans to tell MPs on Thursday that CBDCs could one day coexist with so-called stablecoins and even said it could complement them:
In some future cases, the CBDC [central bank digital currency], such as cash currently coexisting with commercial bank money, by providing a secure central bank liability in the digital financial ecosystem , stablecoins and commercial bank money can coexist with and complement them.
Thursday’s announcements focused on private sector payment innovations, including stablecoins, a type of cryptocurrency that the Fed intended to peg to the dollar or another national currency. It came as he was discussing a potential new form of money to keep up with.
Ms. Brainard will testify at noon before a House Financial Services Committee hearing on the benefits and risks of CBDCs.
Market learned important lesson from TerraUSD
Stablecoins after seeing the value of TerraUSD, once one of the largest stablecoins, plummet to well under a dollar This month it has caught the attention of regulators again. About Terra, Brainard states in his prepared statement:
The recent turmoil in the crypto financial markets makes it clear that the steps we take now, whether on the regulatory framework or on the digital dollar, must be robust for the future evolution of the financial system.
CBDCs can also ensure that the dollar’s global reserve status continues, adding:
The digital dollar allows people around the world to use the dollar to transact and do business in the digital financial system. This could be a potential way to ensure that they continue to rely on the strength and security of the US currency.
Lael Brainard thinks CBDCs can play a complementary role for stablecoins. Emphasizing the importance of cash, the Fed Vice Chairman says that as digital payment methods develop, less used cash can be supported by CBDCs. As a result, we can see that all payment systems move to the Blockchain base in the coming years, as can be understood from Brainard’s work.
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