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Federal Reserve Board’s Lael Brainard Testifies on Emergent Digital Financial System

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Lael Brainard, vice chair of the Federal Reserve Board, told the House Financial Services Committee that she believes a central bank digital currency, stablecoins and commercial bank money could exist together in the future financial system.

Brainard said in her written testimony published Thursday that establishing a CBDC to complement cryptocurrencies would offer “a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money.”

Conservative investors may find a CBDC attractive in stressful times and the potential wide availability of a digital banknote can possibly lower aggregate banking deposits, the Fed official added.

She proposed offering zero interest-bearing accounts or imposing consumer limitations if the Fed decides to move forward with CBDC development as part of risk mitigation measures.