Fed Board Member's Candid Remarks at Cryptocurrency Event: "We Will Lead Digital Currency"

"Digital Dollar Reduces Various Risks"
Urgent Need to Improve US Outdated Payment System
Checks China's Digital Yuan Dominance
Hedge Fund Leader Publicly Buys Bitcoin
Musk Supports Mining in North America
Bitcoin Nears $40,000 Rebound

Rayall Brainard Fed Board Member
Photo by AP Yonhap News

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. central bank, the Federal Reserve (Fed), actively moving toward the introduction of digital currency (CBDC) is interpreted as a shift reflecting concerns over the spread of cryptocurrency trading.

It has become clear that there is a consensus that if the Fed continues to neglect the introduction of a digital dollar, it could lead to greater problems.

Having confirmed the demand for digital payments during the COVID-19 situation, there is also a sense of unease that the U.S. cannot just stand by and watch China's unilateral push for the digital yuan.

As the U.S. and China accelerate their CBDC efforts, the movements of central banks in other countries are also expected to speed up.

◇ Fed Director’s Resolute Remarks at Cryptocurrency Event = Lael Brainard, a Fed director, attended a virtual event hosted by cryptocurrency media CoinDesk on the 24th (local time) and delivered a determined message regarding the digital dollar policy.

She introduced that "the Fed is strengthening public sector involvement and research for the digitalization of the dollar," emphasizing the necessity of a digital dollar. She pointed out that cryptocurrencies have potential issues such as fraud, and stated, "A digital dollar, which is central bank money issued in digital form, can reduce various risks."

Brainard particularly warned, "If stablecoins (cryptocurrencies pegged to the dollar's value) are widely used and utilized as alternative payment systems, the existing payment system could face the risk of fragmentation." This suggests that the Fed is concerned that cryptocurrencies might disrupt the central bank’s payment system.

She repeatedly stressed the need for the digital dollar, rather than existing cryptocurrencies, to be used in payment systems. She concluded that innovation in payment systems should be based on improving the current system.

◇ U.S. Can No Longer Delay Improving Outdated Systems = CNBC highlighted that Brainard’s remarks came shortly after Fed Chair Jerome Powell mentioned that a report on the introduction of a digital dollar would be released by summer.

The U.S. payment system is considered outdated to the extent that it cannot be called advanced. The Fed’s payment system is widely regarded as stuck at a pre-internet era level. Instead, fintech companies are increasingly attempting to enter payment services through cryptocurrencies. Representative examples are PayPal and Venmo, which are popular among Americans.

In this situation, with cryptocurrencies emerging and showing signs of shaking up the payment system, the Fed can no longer just stand by. The backward U.S. payment system was also criticized when the government’s COVID-19 relief payments were delayed.

◇ China’s Cryptocurrency Crackdown Also Aims to Promote Digital Yuan = There is growing analysis that China’s recent crackdown on cryptocurrencies is ultimately a strategic move to promote the digital yuan.

On the 24th, the Economic Information Daily, a newspaper published by China’s state-run Xinhua News Agency, argued in an editorial that "the government should strengthen the crackdown on illegal mining and trading of virtual assets to create a better environment for the launch of the digital yuan." The Chinese government’s stance on cryptocurrencies and the digital yuan was revealed through state media.

China’s push for the digital yuan is expected to further accelerate the U.S. digital currency introduction. Brainard also expressed the opinion that the U.S., as the issuer of the global reserve currency, should lead the adoption of digital currency. Jan Hatzius, Chief Economist at Goldman Sachs, explained, "The Fed has hesitated to introduce a digital dollar considering the dollar’s status as the global reserve currency, but ultimately there is a desire to introduce a digital dollar."

◇ Hedge Fund Pioneer Also Holds Bitcoin = On the same day, Bitcoin showed strength as supporters’ remarks continued. Elon Musk, CEO of Tesla, tweeted, "I spoke with Bitcoin miners in North America. They said they would inform about their current and planned use of renewable energy," and evaluated it as "potentially promising." North American Bitcoin mining companies formed a council that day. After Musk’s tweet, Bitcoin’s price rose by 19%, approaching $40,000. The day before, Bitcoin had plunged to $31,000.

Ray Dalio, the ‘godfather of hedge funds’ and chairman of Bridgewater, disclosed that he holds Bitcoin. In an interview with CoinDesk, Dalio said, "I hold some Bitcoin." He added, "Bitcoin’s biggest threat is its success," anticipating that governments around the world will move to regulate it.

This content was produced with the assistance of AI translation services.