The United States government is sharpening its focus to employ CBDCs but dollar-backed stablecoins seems to be out of the picture. The update was provided this morning in a speech by a board member of the Federal Reserve Commission, Lael Brainard.
Brainard ruled out the use of stablecoins like the USDC or Tether. She stressed that the increased use of stablecoins would pose great issues for the economy. She also mentioned the difficulties associated with using them for large scale payments. Further detailing that the use of private digital currencies are capable of imposing strains on households and businesses.
The Economist further noted that stablecoins do not provide consumer protection. Her argument pointed out the volatility of digital assets and as she mentioned they cannot “carry the same level of protection as bank deposits or fiat currency.”
What Matters More; a Stablecoin or a CBDC?
In a reaction against the feds’ consideration of CBDCs, Dante Disparte wrote an opinion article on the issue. Disparte, who doubles as the Chief Strategy Officer and Head of Global Policy at Circle argues that stablecoins are really as valuable as the dollar.
He stressed that dollar-backed digital currencies like the USDC are 100 percent backed with real dollar assets. He added that stablecoins needed to be preserved in the two-tier U.S. banking system and therefore making it sound and valuable.
Lael Brainard has warned that the use of stablecoins might take the country back to a period in the nineteenth century when private firms issued ineffective banknotes that constituted fraud. Brainard listed some of the benefits of employing a CBDC. She mentioned privacy, financial inclusion, improved efficiency, and preservation of real value.
The Fed board authority had reassured the public that the employment of CBDCs isn’t a migration to digital assets that would replace fiat but one that would complement it.