Federal Reserve Board ("FRB") Governor Lael Brainard described technological and market developments driving the FRB's deliberations on central bank digital currencies. In a speech before the Consensus by CoinDesk 2021 Conference, she outlined policy factors that the FRB is considering with respect to its increased public engagement on central bank digital currencies ("CBDCs"). Ms. Brainard stated that the FRB intends to publish in the summer of 2021 a discussion paper seeking public comment on questions relating to "payments, financial inclusion, data privacy and information security."
Ms. Brainard highlighted these developments concerning CBDCs: (i) the increasing prevalence of digital private money; (ii) the shift to digital payment methods; (iii) foreign countries' development and use of CBDCs in cross-border payments; and (iv) the importance of efficiency and affordable payments with respect to underbanked communities.
Ms. Brainard stated that an evaluation of a CBDC requires consideration of the benefits and risks associated with its use and its impact on broader policy objectives. Ms. Brainard outlined the following "prominent considerations":
- maintaining general access to secure central bank money;
- enhancing efficiency in payments, clearing and settlement;
- advancing competition in payment providers and reducing transaction costs;
- decreasing frictions in cross-border payments;
- complementing currency and the existing payment system;
- maintaining stability in the financial system and monetary policy transmission;
- preserving privacy and ensuring financial integrity; and
- expanding access to banking services for underbanked communities.
Additionally, Ms. Brainard explained that (i) multidisciplinary teams at the FRB are examining technological considerations with respect to a potential U.S. CBDC, and (ii) supervised banking institutions are experimenting with novel technologies to improve their operations in response to customer demands for digital assets-related services.
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