“Today, the speed by which consumers and businesses can access the funds following a payment can vary significantly,” Brainard said in a web address to the CoinDesk conference Monday. “Advances in technology, including the use of distributed ledgers and smart contracts, may have the potential to fundamentally change the way in which payment activities are conducted.”
Although cryptocurrencies like bitcoin are digital, a Central Bank Digital Currency would be fundamentally different from current cryptos because it would still be controlled by a central bank rather than a decentralized computer network.
Brainard didn’t specifically address cryptocurrencies, but she noted “new forms of private money” may add risks to the financial system and potentially undermine consumer protections.
“In contrast, a digital dollar would be a new type of central bank money issued in digital form for use by the general public,” Brainard said. By introducing “safe” central bank currency, a CBDC would reduce such risks, she said.
The pandemic not only accelerated the migration to digital payments but also underscored the importance of access to timely and safe financial transactions, Brainard said: “While the large majority of pandemic relief payments moved quickly via direct deposits to bank accounts, it took weeks to distribute relief payments in the form of prepaid debit cards and checks to households who did not have up-to-date bank account information with the Internal Revenue Service.”
With a digital currency, those relief payments could be distributed “more quickly, cheaply, and seamlessly.”