On May 26 local time, Lael Brainard, vice chairman of the Federal Reserve, said at the hearing of the house finance committee that the world is accelerating the process of using digital payment. With the issuance of central bank digital currency (CBDC) by many countries, the digitization of the US dollar may help to maintain its global dominance.
Previously, many Fed officials often said that the Fed did not intend to promote CBDC without the support of the president and Congress.
According to Reuters, Brenner reiterated that the Fed has not made a decision to promote the digital dollar. Brennard acknowledged that there are risks in issuing CBDC or ignoring it, and pointed out that even if it is agreed to set up digital dollars, it may take five years to put it into use.
"I don't think we should take the global status of the US dollar for granted. When other major economies promote the issuance of digital currencies, we should consider whether the US dollar will maintain its dominant position when the United States does not issue them." She told lawmakers in Congress.
Brennard also said that she prefers non interest bearing digital dollars, which can mitigate the impact on commercial bank deposits.
In January 2022, the Federal Reserve released the discussion paper "money and payment: dollar in the era of digital transformation" to solicit public opinions on the issue of digital dollar. The comment period ends on May 20, and the Fed plans to release a summary of its comments in the near future.
According to coindesk, the banking lobby group said in a letter to the Federal Reserve that Wall Street bankers believe that the introduction of digital dollars by the Federal Reserve may damage the existing banking foundation. Lobbyists from the American Bankers Association predict that the issuance of digital dollars will mean that "71% of the deposits of commercial banks' funds will have the risk of being transferred to the Federal Reserve", which will increase the financing costs of commercial banks to an "unsustainable" level.