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The number 5 is the number of years it could take for the US to launch its own "digital dollar" according to federal Reserve Vice Chair Lael Brainard.
In this article, I am going to discuss the meaning of CBDC, goals and significance to the U.S economy.
CBDC which means Central bank digital currency is a digital form of a country's fiat currency. A CBDC is issued and regulated by a nation's monetary authority or central bank.
Goals of CBDC
In the US and many other countries,many people do not have access to financial services. In the US alone,5% of the adults do not have a bank account. An additional 13% of the US adults have bank accounts but use expensive alternative services like money orders, payday loans and check cashing services.
The main goal of CBDC is to provide businesses and consumers with privacy, seamless means of transaction, convenience, accessibility and financial security. CBDC could also decrease the maintenance a complex financial system requires,reduce cross border transaction costs,and provide those who currently use alternative money transfer methods with cheaper options. Central Bank digital currency would also reduce the risks of using digital currencies in their current form.
Significance of CBDC to the US economy
"I really see the potential for a digital dollar as being complimentary to a more stable, efficient system that would include stable coins and commercials bank" Lael Brainard told the House finance services committee.
The creation of CBDC by the Federal Reserve will greatly support the international role of the dollar system.
As stablecoin are the dominant force of the US digital dollar, failure to create CBDC poses the risk of fragmentation of payment system.
Reference:
https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc-asp