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Fed’s Lael Brainard pushes digital dollar as central bank currency race heats up

  • Federal Reserve Governor Lael Brainard said a cryptocurrency backed by the central bank could provide a variety of benefits.
  • Getting payments to people during the early days of the Covid pandemic was one example. She also cited cross-border transactions and protection against fraud.

US Federal Reserve Governor Lael Brainard attends a "Fed Listens" event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019.Eric Baradat | AFP | Getty Images

Federal Reserve Governor Lael Brainard pressed the case for a digital dollar, saying Monday that a cryptocurrency backed by the central bank could provide a variety of benefits.

Providing financial services to the nearly 1 in 5 Americans considered "underbanked" is one of the advantages Brainard cited in a speech to a conference presented by Coindesk.

She also cited the safety of a Fed-backed system, as well as improvements in efficiency and cross-border payments, or transactions between people in different countries.

While stressing the importance of moving forward carefully, Brainard said the Covid-19 pandemic strengthened the need for a system in which a broad swath of the public has access to well-regulated digital money.

"The Federal Reserve remains committed to ensuring that the public has access to safe, reliable, and secure means of payment, including cash," she 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."

Those comments come days after Fed Chairman Jerome Powell announced that the central bank this summer would be releasing a working paper that addresses multiple issues involving Central Bank Digital Currencies.

The Boston Fed and MIT have launched a joint project in which they will set up a hypothetical model, and several other Fed districts also are involved with research of their own.

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