Fed No. 2 "Issuing Digital Dollar Will Help Sustain Dollar Hegemony"

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Josel Gina] Lael Brainard, Vice Chair of the U.S. Federal Reserve (Fed), the second-in-command at the central bank, stated that the central bank digital currency (CBDC), the digital dollar, would help maintain the dollar's hegemony as the global reserve currency.

According to local media reports, Vice Chair Brainard appeared before the U.S. House Financial Services Committee on the 26th (local time) and said, "It is important to consider whether the U.S. can maintain the same kind of hegemony without issuing this." This remark suggested that many countries, including the European Union (EU), Japan, and the United Kingdom, are considering adopting CBDCs. China is currently piloting its own CBDC, the digital yuan.

Vice Chair Brainard acknowledged, "Just as there are risks when issuing, there are also risks when not issuing," but predicted that "the issuance of the digital dollar would help stabilize the financial system." He evaluated, "I see the potential of the digital dollar as a complement to a more efficient system, including stablecoins." Furthermore, he forecasted that issuing the digital dollar would also have the effect of promoting innovation in the private sector.

However, even within the central bank Fed, opinions on issuing the digital dollar are currently divided. The Wall Street Journal (WSJ) reported that the Fed is split and does not seem likely to make a decision on whether to issue the digital dollar anytime soon.

On the same day, Vice Chair Brainard also mentioned the need for regulation in relation to the overall turmoil in the cryptocurrency market triggered by the collapse of the Korean cryptocurrencies Luna and TerraUSD (UST). He emphasized, "The recent turmoil in the cryptocurrency market, whether through a regulatory framework or the digital dollar, clearly shows that the measures we take now must be robust for the future evolution of the financial system."