U.S. Federal Reserve Vice Chair Lael Brainard said a central bank digital currency (CBDC) could coexist and complement stablecoins in her Thursday testimony to a House Financial Services Committee virtual hearing.
See related article: CBDC tracker shows U.S. falling further behind
- CBDCs are digital currencies released and backed by central banks, while stablecoins are cryptocurrencies that are pegged to an underlying asset, such as the U.S. dollar.
- “[CBDCs] 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 former Fed governor said having caps on CBDC holdings and not offering interest on CBDC accounts could help preserve the role of traditional banking and credit unions in the economy.
- She added that new regulation is necessary following the recent collapse of algorithmic terraUSD (USTC) and Terra (LUNC).
- The Fed has yet to commit to a digital dollar, but Brainard has been a longtime supporter of a potential U.S. CBDC.
See related article: ECB study says anonymous CBDC may get outshined by private coins