One of the main reasons the United States needs a digital dollar is that other countries are racing to launch their own central bank digital currency (CBDC), according to Federal Reserve Governor Lael Brainard on Friday, according to Reuters.
According to Reuters, Brainard said at the Aspen Institute Economic Strategy Group, “The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the US doesn’t have one, I just, I can’t wrap my head around that.”
A CBDC report from the Fed is expected in early September, as the central bank weighs the benefits of creating a digital currency. Meanwhile, China is putting its own CBDC to the test.
Closer to home, Brainard stated in the paper that the growth of stablecoins could split the payment system in the absence of a digital dollar.
According to Reuters, the Fed governor stated that a digital dollar may assist those without bank accounts in receiving government aid such as pandemic relief payments.
Separately, Brainard stated that she sees no evidence that recent high inflation readings are pushing longer-term inflation expectations above the central bank’s 2% target.