Foreign CBDC and stablecoins are unlikely to threaten the US dollar, says Fed Vice President Randal Quarles.
Randal Quarles spoke about CBDC and stablecoins
In a statement prepared for Monday’s Utah Bankers Association’s annual convention, Quarles said foreign currencies – both fiat and digital – are unlikely to challenge the role of the US dollar in the global economy. He cited the size of the American economy, trade relations with other nations, and “Credible US monetary policy” as reasons why it felt that even a central bank digital currency issued in another power would not pose a threat to the dollar.
– It is inevitable that, as the global economy and financial system develops, some foreign currencies (including some foreign CBDCs) will be used in international transactions more often than they are today – Quarles said. – However, it seems unlikely that the status of the dollar as a global reserve currency or the role of the dollar as the dominant currency in international financial transactions will be threatened by foreign CBDC – added.
He spoke in a similar vein about stablecoins. He said there was “A legitimate and strong regulatory interest in constructing and managing stablecoins.” He added that the dollar stablecoin could support its fiat counterpart by making cross-border payments faster and cheaper.
As he added, even Bitcoin (BTC), which he described as “Risky and speculative investment, not a revolutionary means of payment”, is unlikely to affect the role of the US dollar, given that cryptocurrency has not yet become a widely accepted tender.
The US doesn’t need CBDC
However, rather than pressure the Federal Reserve to create its own CBDC, Quarles suggested that the federal digital currency would discourage private sector innovation as well as potentially limit the availability of credit and many commercial bank services. While he did not rule out that the US government finally released CBDC, he added that it was necessary to prepare to prevent illegal activity and justify the potential cost of expanding the Federal Reserve’s operations.
– The potential benefits of the Federal Reserve CBDC are unclear […] developing a CBDC may, I believe, pose a considerable risk – added.
In May, Federal Reserve Chairman Jerome Powell said the government body would publish a discussion paper this summer to explore potential CBDC implementation. Powell has spoken many times about the possible consequences of the US government issuing CBDC, saying that he believes it is more important that “do it right than be the first ”. Another time, however, he said something different.
– [Stablecoiny] can become systemically important overnight – said in January this year. and he added that the public would expect some reaction from the authorities. Hence, he added, work on CBDC is one of the Fed’s priorities.