Fed official: Cryptocurrency backed by central bank could offer variety of benefits

Federal Reserve Gov. Lael Brainard on Monday said a cryptocurrency backed by the central bank would provide multiple benefits to Americans.

Brainard, in a speech to a conference hosted by CoinDesk, cited the safety of a federally backed system, the opportunity to provide banking services to “underbanked” Americans and the ease of making payments across countries as reasons for embracing a digital dollar.

“The Federal Reserve remains committed to ensuring that the public has access to safe, reliable, and secure means of payment, including cash,” Brainard said. “As part of this commitment, we must explore — and try to anticipate — the extent to which households’ and businesses’ needs and preferences may migrate further to digital payments over time.”

She said the COVID-19 pandemic underscored the need for well-regulated digital currency, adding it was important to approach this process slowly.

“In the United States, the pandemic led to an acceleration of the migration to digital payments as well as increased demand for cash,” Brainard said. “While the use of cash spiked at certain times, there was a pronounced shift by consumers and businesses to contactless transactions facilitated by electronic payments.”

She went on to note that “some foreign countries have chosen to develop and, in some cases, deploy their own” central bank digital currency.

Other countries like the China and the UK have also recently begun exploring the possibility of creating digital currencies.

The Bank of England and the Treasury announced last month that it would be weighing the benefits of a potential British digital currency, dubbed “Britcoin.”

Brainard’s remarks come on the heels of Federal Reserve Chairman Jerome Powell announcing that the Fed would release a working paper this summer that looks at developing a digital currency backed by the central bank, CNBC reported.