Fed’s Brainard: Stablecoins like Libra raise ‘fundamental questions’ about financial stability, private money

Federal Reserve governor Lael Brainard gave a speech on Thursday about the future of retail payments, during which she made mention of the implications around stablecoin projects such as Libra.

Libra – which was launched to great fanfare and skepticism last summer but a consortium of firms led by social media giant Facebook — has been cited by central banks like the Fed as a catalyst for their own work in the realm of digital currencies. Indeed, it was the Fed’s chairman, Jerome Powell, who said in February that Libra “really lit a fire” in the context of the U.S. central bank’s work. 

“We’re working hard on it, we have a lot of projects going on, lot of efforts going on on that right now,” he told a Congressional committee at the time. 

Brainard herself said in February that the Fed has been “collaborating with other central banks as we advance our understanding of central bank digital currencies.”

Much of Brainard’s speech focused on FedNow, a system being developed by the Federal Reserve and aimed at facilitating instant payments between financial institutions in the U.S. She revealed that the Federal Reserve Board “has approved the core features and functionality based on extensive input from stakeholders” for the FedNow system. 

Brainard cast a wider net near the end of her remarks, offering her take on the future of the payments landscape. It’s here that she highlighted stablecoin projects like Libra, which, as The Block reported, shifted to a multi-token model earlier this year that will see the initiative issuing stablecoins tied to individual government-issued currencies. The Libra Association’s modified white paper seemed to suggest that the network will be catered, at least in part, to central banks that might want to utilize the network.

“Efforts by global stablecoin networks such as Facebook’s Libra project to drive the next stage of payment innovation have raised other fundamental questions about legal and regulatory safeguards, financial stability, and the appropriate role of private money,” Brainard said Thursday. “The Federal Reserve remains optimistic about the power of technology and innovation to deliver payments safely, immediately, and efficiently when the appropriate safeguards are in place.”

She closed by reiterating the Fed’s goal of using FedNow to “provide a modern payment infrastructure for the future.”

theblockcrypto.com

Fed’s Brainard: Stablecoins like Libra raise ‘fundamental questions’ about financial stability, private money
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