Fed Governor Lael Brainard said the central bank is looking at a broad range of issues around regulations and protections for digital payments and currencies, including the costs and potential benefits of issuing its own digital currency.
“By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost.”
But it’s not all positive. She noted that the bankers worry some proposed digital currencies, like Facebook’s Libra, will operate outside the financial system, potentially disrupting monetary policy and financial stability.
That sounds like the Fed is worried it might lose some power, and is probably one of the reasons the central bank is considering its own currency.
The Fed is also “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC (central bank digital currency).”
“In the United States no less than in other major economies, the public sector needs to engage actively with the private sector and the research community to consider whether new guardrails need to be established, whether existing regulatory perimeters need to be redrawn, and whether a CBDC would deliver important benefits on net.”
Dozens of central banks globally are also doing such work, a recent international study showed, with China moving ahead on its plans to issue a digital coin. They’re all worried about the same thing. If too many people move their wealth out of government-controlled monetary systems, then the governments lose control over the people. And that is a non-starter for any group in power.