Fed's Brainard says "we are monitoring new technologies closely" when referring to stablecoins
|Fed's Brainard was speaking today at her talk titled "Digital Currencies, Stablecoins, and the Evolving Payments Landscape".
She speaks a lot about stablecoin and digital currencies and if you want to read the whole document click here.
Brainard says that technology is driving rapid change in the way we make payments and in the concept of "money.". One thing I picked up on was the mention of Facebooks Libra on many occasions. It seems to have rattled central bankers to the core.
She went on to say "We will likely see far-reaching innovation in payments in the coming years, with a plethora of new and emerging options, including stablecoins". This suggests it's not only stablecoins the Fed are wary of, and there may be more technological advancements on the minds of central bankers.
The Federal Reserve remains confident in the power of technology and innovation to transform the financial system and reduce frictions and delays, while preserving consumer protections, data privacy and security, financial stability, and monetary policy transmission and guarding against illicit activity and cyber risks. Given the stakes, global stablecoin networks should be expected to meet a high threshold of legal and regulatory safeguards before launching operations. We are monitoring new technologies closely to ensure that the innovations that arise fit with our operational responsibilities and broader public policy goals
This paragraph throws in all the excuses that have been used so far to slow down the adoption of cryptocurrencies. User data and safety are at the forefront of central bankers minds and rightly so. I would ask how many times Bitcoin has had issues in the area and wonder if the Fed asked the same question.
Moving on in the final remarks it is said:
Central bank money is important for payment systems because it represents a safe settlement asset, allowing users to exchange central bank liabilities with confidence in their acceptance and reliability. In addition, central banks can play a critical role as providers of liquidity by lending central bank money at moments of stress.
The point about liquidity and moments of stress are important. Liquidity is how retail banks make their money. They borrow from central banks to lend further afield. Cryptocurrencies put this system in jeopardy and I think that is one of the real issues at play, the break up of the status quo.
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