This posting in forexlive is a bullet point summary of main points covered in a speech made by Lael Brainard, a member of the Fed’s Board of Governors, around the use of CBDCs. We have been covering the space consistently both on these pages and within member research, since many simultaneous developments are underway.
The main points covered are listed in the posting and then a reader who is interested can link out to the Fed website to read the full speech content.
- ‘Cross border payments one of the most compelling cases for digital currencies
- The central bank digital currency could be a foundation for innovation, more efficient payment system
- In contrast to private money, a CBDC would be a new type of central bank money
- not obvious private stablecoins could offer same protections as bank deposits or cash
- consumers trust current system because of the deposit insurance, supervision, other protections
- in contrast to private digital money, a CBDC would be a new type of central bank money’
So this speech is just sort of a rehash of the general discussion around CBDCs, for which the U.S. has not made much progress other than continually studying the possibilities. The Fed is expected to publish research around findings to date sometime during the next several months.
It is unclear whether or not this research is part of the Boston Fed collaboration with MIT that began during 2020. In any event there are two more advanced economies with CBDCs in trial; China and Sweden. The cross-border aspect of the CBDC discussion is one that is particularly of high focus, given that the BIS has an initiative underway for such a platform.
‘Cross-border payments, such as remittances, represent one of the most compelling use cases for digital currencies. The intermediation chains for cross-border payments are notoriously long, complex, costly, and opaque. Digitalization, along with a reduction in the number of intermediaries, holds considerable promise to reduce the cost, opacity, and time required for cross-border payments. While the introduction of CBDCs may be part of the solution, international collaboration on standard setting and protections against illicit activity will be required in order to achieve material improvements in cost, timeliness, and transparency.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
