A member of the United States Federal Reserve’s board of governors has signalled that the institution is more open to the idea of central bank digital currency than previously.

Lael Brainard — who chairs several Fed committees — made her remarks during a speech at a symposium on the future of payments at the Stanford Graduate School of Business on Feb. 5.

In her speech, Brainhard said the Fed was “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC (central bank digital currency).”

Debate has taken on a new urgency

Brainhard cited a recent survey by the Bank for International Settlements revealing that as of January 2020, 80% of central banks worldwide are now engaged in some form of CBDC work. That figure is up 10% from the previous year.

Given the dollar’s important role in global markets, Brainhard argued that it is essential for the Fed to remain “on the frontier of research and policy development regarding CBDC.”

New digital payments, currency and settlement instruments are now proliferating, she observed, singling out Facebook’s Libra project and China’s forthcoming digital yuan as pivotal developments in the private and public sector worldwide.

Twice in her speech Brainhard defined the potential role for CBDCs as being that of maintaining a sovereign currency as the anchor of a given nation’s payment system.

And while she did not explicitly extrapolate this argument to a global scale in the case of the U.S. dollar — whose key role extends well beyond nation-state bounds — she noted the potential impact of new private and public projects:

“For smaller economies, there may be material effects on monetary policy from private-sector digital currencies as well as foreign central bank digital currencies. In many respects, these effects may be the digital version of ‘dollarization,’ with the potential for a faster pace and wider scope of adoption.”

Less than 18 months ago Brainhard had told a Digital Currency Conference in San Francisco that “there is no compelling demonstrated need for a Fed-issued digital currency.

FedNow

Developments like Libra have also prompted calls on the Fed to accelerate its rollout of its forthcoming real-time, 24/7 payments and settlements service, “FedNow.”

While not a full-fledged CBDC, the service is designed to enable consumers and enterprises to manage their funds more flexibly and complete time-sensitive payments outside of conventional banking hours.