November 30, 2021

Volume XI, Number 334

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November 30, 2021

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November 29, 2021

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The March Toward a U.S. CBDC

Within a recent address to an industry conference, Dr. Lael Brainard, a member of the Board of Governors of the Federal Reserve System (FRB), drove home her belief that the adoption of stablecoins over a U.S. Centralized Bank Digital Currency (CBDC) could place the U.S. in danger of “inefficiency, fraud, and instability in the payments system,” drawing a parallel to a period in U.S. history during the 19th century when the U.S. had competition among issuers of private paper banknotes. In her support of a U.S. CBDC, Governor Brainard stated that there are four developments driving the increased focus on a CBDC: (1) the growing role of digital private money, (2) the migration to digital payments, (3) plans for the use of foreign CBDCs in cross-border payments, and (4) concerns about financial exclusion. These developments have brought the FRB to assess the benefits of a U.S. CBDC which Governor Brainard stated includes the fact CBDCs:   

  • preserve general access to safe central bank money

  • promote competition and diversity and lower transactions costs

  • improve efficiency

  • reduce cross-border frictions

  • complement currency and bank deposits

  • protect privacy and safeguard financial integrity, and

  • increase financial inclusion

Governor Brainard’s comments add context to what Federal Reserve Chair Jerome Powell stated on May 20, 2021 when he released a “Message on Developments in the U.S. Payments System."  In his comments, Chairman Powell confirmed, the Federal Reserve Board will issue a discussion paper this summer outlining the FRB’s current thinking on digital payments, with a particular focus on the benefits and risks associated with CBDC in the U.S. context. The chairman went on to state, “Irrespective of the conclusion we ultimately reach, we expect to play a leading role in developing international standards for CBDCs, engaging actively with central banks in other jurisdictions as well as regulators and supervisors here in the United States throughout that process”.

Obviously, the creation and adoption of a U.S. or any sovereign nation’s CBDC will have broad impact across every aspect of the financial services and payment industries. Participants within our industries should be following these developments closely and begin to contemplate and outline what their response, adoption, and integration plans will look like. 

Copyright ©2021 Nelson Mullins Riley & Scarborough LLPNational Law Review, Volume XI, Number 145
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About this Author

Richard B Levin FinTech and Regulation Attorney Nelson Mullins Denver
Partner

Richard is chair of the FinTech and Regulation Practice and was one of the first lawyers to focus on the regulation of blockchain and digital assets. He is considered a thought leader in the FinTech space. Richard brings his experience as a senior legal and compliance officer on Wall Street and in London to bear in advising clients on corporate, FinTech, securities, and regulatory issues. A problem-solver by nature, he has been advising FinTech clients on legal and regulatory issues since the start of electronic trading in the late 1990s. His practice focuses on helping...

303-583-9929
Craig Nazzaro Finance Attorney Nelson Mullins Atlanta
Partner

Craig Nazzaro advises a variety of entities on all regulatory and compliance issues that impact the financial services industry including banks, non-bank lenders, servicers, investors, third party payment processors, and debt collectors. He also defends clients against charges of liability and regulatory violations.

Craig’s prior experience includes serving as a vice president and assistant general counsel with J.P. Morgan Chase, where he managed and coordinated a team of over 20 senior legal officers and attorneys in responding to and resolving...

404-322-6969
Kevin Tran Corporate and Finance Attorney Nelson Mullins Nashville
Of Counsel

Kevin assists clients in matters related to financial regulatory, FinTech, corporate and securities issues. He gained experience at the Federal Reserve Board in Washington, D.C., where he was a Financial Policy Analyst in the Capital and Regulatory Policy group in the Division of Supervision and Regulation. He also served the Board as the Policy Staff Adviser/Chief of Staff to the Deputy Director for Policy. In these roles, Kevin focused on developing regulations and guidance affecting banks and bank holding companies of all sizes, assisting the director with the day-to-...

615-664-5322
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