Both CBDC and stablecoins are meant to be two different yet assets with the same goal to elevate the financial transaction and digitalize the economy.
Vice Chairperson of the United States Federal Reserves, Lael Brainard said that there are possibilities that central bank digital currency (CBDC) could co exist and complement with US Dollar alongside stablecoin with added safety measures. These words from the Fed Co-chair are treated as a portion of her testimony that was released in advance before her appearance in the House Financial Services Committee.
Brainard wrote that the digital dollar or CBDC could coexist and will be complementary to the stablecoins and commercial bank money while providing a safe liability from the central bank in the existing digital financial ecosystem quite similar to co-existence of cash with commercial bank money at present.
Further Fed Vice Chair also explained that there is utmost necessary thoughtful regulation considering the recent collapse experience by Terra network’s algorithmic stablecoin UST and its native token LUNA. She said that the digital financial system is experiencing rapidly ongoing evolution at both the national and international levels that makes the regulators lead to frame the question about the need of Central Bank Digital Currency today.
However she agrees that there would be conditions in future that would make it crucial and would give rise to the need for such steps. Brainard outlined that as there are risks involved in doing something towards the digital economy, there are risks involved even while not doing anything about it.
Additionally Brainard also figured out CBDC’s capabilities that would facilitate global payments settlements and how the country can set an example in the world of digital finance after achieving milestones in terms of privacy, accessibility, security and interoperability.
Federal Reserves for a while now has been asking for comments giving advice for setting up a digital currency. There were mixed reactions and comments regarding the same where several Wall Street bankers expressed their concerns regarding the CBDC that they could disrupt the traditional banking system.
On the other hand, the issuer of USDC stablecoin, Circle, said that a federal stablecoin could give a hard hit to the digital assets belonging to the private sector that are cryptocurrencies in general. Federal Reserve officials have said that the central banks in the United States do not have any intention of going forward with CBDC that does not have support of the President and the Congress.
Source: https://www.thecoinrepublic.com/2022/05/30/how-far-fed-vice-chair-lael-brainard-is-right-saying-cbdc-and-stablecoin-can-co-exist-together/