Fed Vice Chair Brainard Testifies on Central Bank Digital Currency

The House Financial Services Committee heard testimony from Federal Reserve Vice-Chair Lael Brainard in a hearing titled, “Digital Assets and the Future of Finance: Examining the Benefits and Risks of a U.S. Central Bank Digital Currency.” The hearing focused on the utility of a CBDC, authorizing legislation, access to CBDC by the unbanked and underbanked, and the risk to depository institutions, specifically smaller community banks if there is a transition to a digital currency. Throughout the hearing, Brainard emphasized the Federal Reserve would like to see buy-in from Congress and the Administration in the form of legislation before it can move forward. She noted a CBDC would help bring transparency to cross border transactions and possibly allow more individuals to access the banking system, she did however emphasize the importance of safeguards to protect community banks. Brainard stated that a non-interest bearing CBDC and maintaining caps on how much digital currency an individual can hold may prevent a shift away from depository institutions. She added banks would remain crucial as intermediaries if a CBDC were developed. Brainard received several questions on stablecoins and the assets backing those instruments. She stated legislation that includes bank-like regulations may help prevent future volatility in the stablecoin market. While several bills on digital assets have been introduced, the likelihood of a bipartisan package moving in the House and Senate remains low for the remainder of the legislative session.

Click here to read Vice Chair Brainard’s written testimony.