Fed Vice Chairman Brainard said the Fed is considering various means to soften the impact on commercial bank deposits if the U.S. government decides to issue a digital dollar. Brainard said on Thursday that while deposits will inevitably decline, the Fed is looking for ways to avoid a sharp drop in deposits.
Industry lobby groups including the American Bankers Association and the Banking Policy Institute have called on the government to hold off on launching a central bank digital currency, fearing it would divert money from the banking system and reduce credit to businesses and households.
“We’ve been doing a lot of thinking in terms of the potential impact on deposits, and any future developments in the digitalisation of the financial system will lead to a reduction in cash usage and a reduction in bank deposits,” she noted.
