two and a half hours. -- 2.5 hours. >> i recognize myself to give an opening statement. -- in the way that we send and receive money. the early stages of innovation in this round are revealing the clear risk up -- associated with some cryptocurrencies, including significant volatility and even so-called stable points. despite their name, it is

anything but a stable value. earlier this month, saw the dramatic collapse of cherub -- which resulted in and festers losing more than $40 billion and a product -- in a product that was supposed to always return one dollar per east -- each dollar deck -- invested. cdc has the potential to harness the efficiency of cryptocurrencies while providing the security of the u.s. dollar. as we explore the possibility of the u.s. -- and the future of the global financial system, we must keep in mind that we may be in the midst of a new digital assets space race with countries around the world competing to play digital versatile their own

currency and americans cannot be left behind. the united states dollar has long been the global leader in reserve currency worldwide and americans reap enormous benefits from having their currency by the accepted across the globe. a reserve currency means that the united states government -- financing is lower, which translates long-term into lower mortgage and credit card rates that consumers see in other countries. it is not hard to imagine how another major economist --cbdc the ship away at the dollar's leadership status because of the efficiency that --cbdcs offer. -- or development cbdc

including china. -- as the u.s. explores the potential for all -- as it leads the design of the digital dollar to balance the need for privacy and protection while -- to prevent money laundering. the u.s. cbdc should be designed -- the values that other countries like china in this digital asset race-based share, this is why it is critical for the u.s. to stay competitive in this field to ensure that our values prevail as a way -- as the global financial system

evolves. let me send congratulations to dr. brainard as the confirmation of the chair of the federal reserve system. i am happy you joined us to discuss the potential of central bank digital princi or cbdc's. today, we continue the committee's bipartisan series of hearings on digital assets. this hearing will allow us to examine and discuss the fed's i'm going research on cbdcs and to learn how the fed is working with other agencies -- to ensure that the u.s. is properly regulating the cryptocurrency industry. while cryptocurrencies have the potential to offer several efficiencies in the way we send

an receive money, -- there is a clear risk in cryptocurrencies, including significant volatility and either soap -- even so-called stable growth -- it has been anything but a stable value. we saw again the dramatic collapse of -- resulted in an festers who -- investors who lost more than 40 billion. i am repeating all of this because i want it to be clear and i will recognize the ranking member of the committee that went from north carolina. mr. henry for five minutes. >> thank you for being here today. as we seek to understand what

problems the fed issued -- digital princi woodstock. despite this being our third focus on cbdcs in the fifth issuing the report, we have unanswered questions. we knew that would happen. we have to get a better understanding of the consequences of the central bank digital currency. this is why the reports police from the fed -- my republican colleagues and i developed the several -- of a u.s. bank central bank digital princi. -- currency. we have been exploring the impact on cbdc on monetary policy. we have been reviewing the federal reserve phosphorus current authority, if any, to issue a digital currency.

our principal provided a coherent framework to -- they listed a number of potential benefits of a cbdc. much of it could be realized through private sector alternatives. there seems to be a disconnect on how innovation happens, which is outside the walls of government bureaucracies. we do not know the impact of a digital currency on the fed's ability to effectively perform its monetary and regulatory functions. we want to explore that and understand it better. no one has made a compelling -- no one has made a compelling case on why we should expand the fed's made it into retail baking for how the fed issued cvd -- cbdc won't politicize the fed.

the issue is in exploratory phase. however, there is potential for significant things for a financial system if we move forward without sorting out potential consequences. we -- a letter was sent to chairman powell, outlining why the federal reserve should outline their next steps. chair powell has been outspoken. stating, quote, it is more important that we get it right which means we don't always -- just look at the benefits of cbdc but also the risks and trade-offs that have to be thought through fairly. i agree with chair powell's assessment. his discussion paper emphasized that the fed's -- without clear support for the executive branch and congress, ideally in the

form of specific authorizing law. since the job rests with congress to make the decision, we should be thorough in the review. congress should not rush to issue a digital currency. we both should understand whether the benefit of a digital currency outweighs the risk before any further congressional action is considered. thank you, madam chair and i you back. i -- i yield back. >> all rights. who do we have next? >> [indiscernible]

thank you very much. i went to welcomes -- welcome today's distinct witness. without objection, your written statement will be laid part of the record. you will have five minutes to summarize your testimony. should be able to see a timer that will indicate how much time you have left. i will ask you to be mindful of the timer and wrap up your testimony before your time has expired. you are now recognized for five minutes to present your oral testimony. >> chairwoman waters, ranking member mchenry, i am pleased to join you today. there has been growth in a digital financial system to run your digital assets and

facilitated by crypto asset platforms with stable coins. in recent weeks, two widely used have come under considerable pressure. the recent turmoil makes clear the actions we take now whether on regulations our own exploration surrounding our digital dollar should be robust to the future evolution of the financial system. the rapid ongoing evolution of the financial system should lead us to frame the question not as whether there is a need for a central bank digital dollar today but rather, whether there may be conditions in the future that may give rise to such a need. no decision has been made about whether a u.s. cbc will be a part of that future but it is important to undertake the necessary work to inform any decision and ready to move

forward should the need arrive. there are risks on both sides. risks of acting and not acting. the chair of u.s. -- the share of u.s. payments made by cash has declined by one third to 20% over the last five years and the share is even lower for people who are under the age of 45. it is prudent to consider how to preserve ready public access to save central bank money and that is where questions around the issuance of a digital dollar akin to the federal reserve's issuance of physical currency arise. in addition to the migration away from cash, we are seeing growth in new forms of digital private money such as stable coin. they don't share the same protection that underpin confidence and a commercial bank money such as deposit insurance,

access to central bank liquidity and banking regulation supervision. they can lose their promise to value harming consumers and creating broader financial stability risks. we saw in the 19th century active competition among issuers of private paper banknotes left instability and efficiency and was so widespread that led to the name -- the need for uniform national currency and the protections i just noted. in addition to the ability risks is private money such as stable coin. we can see fragmentation. in those kinds of circumstances, a central bank digital dollar could improve the stability and efficiency of the payment system by coexisting with an company stable coins and commercial bank money much like cash coexist with commercial bank money.

that is why we want to make sure banks are among those intermediaries if we were to have such a system with intermediaries which we have said is very important and to develop design features to mitigate those risks. in addition to those two reasons in future states where one or more major foreign currencies are issued, it is prudent to

think about what the risks are in the absence of a u.s. central bank digital dollar and of course china's actions are important but there are other central banks in europe and elsewhere are also far along in terms of thinking about issuing their own digital currency. we should not take the dollar's local status as the dominant payment currency for granted. thank you very much. i look forward to engaging with you on this important issue. >> thank you very much. i now recognize myself for five minutes for questions. one potential benefit the federal reserve highlighted in ed's january cbc report was ac bdc could support the dominant international standing of the u.s. dollar and could help to

ensure our currency is positioned to remain the world's reserve currency and primary medium of exchange internationally in this digital age. the report noted and i will quote, today the dollar is widely used across the globe because of the liquidity of the u.s. financial market. the size and openness of the u.s. economy and the international trust in united states institutions and the rule of law. it is important to consider the implications of a potential future state in which many foreign countries and currency unions may have introduced cbdc 's. end of the quote. some advocates have noted a foreign cbdc's become more widely used, the global power of our currency could decrease. if you look at the cbdc

development in china and elsewhere, you think a u.s. cbdc is essential to preserve the role of the dollar? vice chair brainard: i think this is one of the important considerations in forming the work to better understand the design and potential and importance of a digital dollar. we do derive important benefits from being the dominant payments currency. it does lower the borrowing cost. that does flow through to businesses and consumers. it is important for us to retain the dominant position in international payments. china has already introduced a digital yuan. the ecb is pretty far along in its thinking. if a number of major foreign

jurisdictions do in fact issue digital currencies, it is important to think how that would look for the dollar if the u.s. did or did not join that. regardless of whether the decision is made to move forward, it is very important for us to be involved in standard settings in transactions and our ability to shape those standards will be influenced by whether or not we actually have a digital offering to bring to the table. >> thank you very much. i just want to ask you about the president's direction. it seems he says all of these agencies should work together and we talked with mr. sue just yesterday and he said there have

been no real discussions on cb -- on cbdc. is that true? >> the executive order on digital assets does i believe include a important role for treasury in bringing together the banking agencies to discuss the issue of a central bank issued digital dollar. i do think it will be very important for treasury to convene those discussions and we look forward to fulfilling our role under the executive order. >> but it has not happened yet, is that right? vice chair brainard: it has not happened yet to the best of my knowledge but we are working with other agencies on the executive order and do expect to have discussions convened by treasury. >> thank you very much. the gentleman from north carolina, mr. mchenry, the

ranking member of the committee is now recognized for five minutes. >> you are obviously very steeped in the details and the mechanics of cbdc. we have seen the m.i.t. report. we have seen the boston fed. we have seen the overall fed report on cbdc's. the one thing the fed report makes clear is that legislation is necessary for the fed to issue a central bank digital currency. is that your view? vice chair brainard: the report is clear that the federal reserve would not move ahead without the executive branch and congress and ideally that would take the form of authorizing legislation.

>> i mentioned that in my opening statement and that was my question. i was asking your view. vice chair brainard: of course, i don't have any expertise on the particular -- what kind of authorizing legislation would be necessary but our view as an institution was clearly stated. >> you are the vice chair for the regulation and i just want to ensure it is you understanding the fed is constrained by statutes. that is why i am asking. this is not supposed to be a hard question. as a supposed to be the easy opener. vice chair brainard: it is clear the federal reserve does not have the authority for instance or is precluded from individual accounts. we have taken a strong position on that in the report. and yes, it is important for us

to have strong support, both the executive branch and congress and ideally that would come in the form of authorizing legislation. >> ok. i think you will hear from me on this because it seems like there is some wiggle room you're trying to show. let me move onto my set of questions if i may. what specific problems if any will the central bank digital currency solve? vice chair brainard: i think this is a very important question and set of considerations. and i think the way i think about it is that it is really the future states of the financial system we should be thinking about as we think about the costs and benefits.

potentially risks to creating a cbdc depending on the risk of financial regulation and are also risks to not having a cbdc. what is really important is it takes a long time. if for instance congress were to decide it is very important for the federal reserve to issue a central bank digital currency, it could take five years to put in place the requisite security features, the design features. i cited earlier the norma's changes that have taken place in our financial system over the past five years. a one third decrease in the use of cash. a huge amount of migration to mobile apps for payments and out of the banking system. an introduction by several foreign central banks of their own digital currencies and

plans. >> the question i have -- i understand. my question is what problem we are trying to solve for. i have not gotten a clear answer on this. for most consumers, payments are digital. the movement of cash between banks is digital. we see in a private sector the payment system working well. we see the fed system is expected to go live in 2023. what are the differences here from the alternatives and why the fed would need to have a cbdc? vice chair brainard: three reasons i cited earlier. declining use of cash, potentially consumers no longer having direct access to a safe central bank issued digital currency. that is one significant risk.

second significant risk is stable coin become the dominant form of u.s. digital dollar. should i continue? and in that world, you can have a fragmentation of the payment system, instability of those digital currencies. the kind of instability -- chose to move away from 100 years ago. >> madam chair, thank you for this. i think this is the reason why we need to have a well regulated stable coin. >> mr. cleaver who is also the chair of the subcommittee on housing, community development is recognized for five minutes. >> thank you, madam chair. vice chair, thank you for being

with us today. appreciate it very much. as you well know, the federal reserve board, the federal reserve bank of boston has partnered with m.i.t. to conduct cbdc related research through project hamilton. together, they have studied the technological aspects of potential cbdc -- this is going to be hard. i say cb dg all the time. but cbdc was the first phase of the project released in february 2022 which looked into cryptography. some have argued existing american digital initiatives for

real payment transfer will likely have slower settlement time when compared to project hamilton or the cbdc's being developed by other nations. what is your view? is there a fed view? what is fed now likely to do now and will your study be laid out to us and to the senate? we are of course very much interested in any sensible well studied work that will help us deal with this issue that is scary, at least to me. it is frightening to me. what will happen with the research? vice chair brainard: thank you. the work that we are doing now

on fed now is on a real-time payment platform. it is the first system we are building that is automated. i think we are learning a lot about the fiber -- the cybersecurity requirements, potential settlement time, the execution of requirements. it is very important to -- important experience for us. it also is a good example of how long it takes from the time the decision is made to build such a new platform to the time when it is ready to be connected up to financial institutions. there is relevance for a central

bank digital currency to we have a variety of research around the system that is potentially relevant both to what it would take to execute on a digital dollar issued by the federal reserve but also relevant to simply understanding some of the private sector platforms that have stable coins or are building stable coins. it is very helpful to us, to project hamilton to experience -- to experiment what kind of settlement times, how many transactions per second you might be able to see when you layer on the kind of cryptography that is this is harry to make these transactions secure and private -- make these -- that is necessary to make these transactions secure and private. it is important for us to continue with technological research and experimentation not

only for purposes of our own payments infrastructure but more broadly to understand the private sector and where some of the risks may lie and where some of the efficiencies may lie. >> do you believe the fed will have slower settlement time compared to project hamilton? vice chair brainard: i would be a little hesitant to compare simply because project hamilton is entirely experimental in nature. and of course with fed now, we are building in very significant operational resilience and security. i would be cautious about thinking about the time comparably between those two. >> i yield back the balance of my time.

>> thank you very much. the gentleman from florida, mr. posey, is recognized for five minutes. >> thank you very much, chair waters. if people got paid in central bank currency, could it threaten lending activities? vice chair brainard: one of the things that i have focused most on in thinking about this debate is how important it is to our economy, to the federal reserve to have a vibrant resilient banking system with banks of all sizes. we want to make sure anything we do continues to support that banking system. as we think about issues, one thing that is important is to

recognize that anything we would want to do in this space would have to be consistent with banks remaining really important intermediaries of any future evolution of the u.s. payments and financial system. that is one of the reasons we specify in our sub -- our report it should be an intermediated system with banks with intermediaries. in terms of the deposits, there are certainly a lot of considerations that we have been doing in terms of thinking about potential implications for the posits. thanks -- for deposits. banks are very important in terms of credit provision and policy transmission. we are seeing massive changes

where payments are made increasingly through mobile payments apps. we have seen a tenfold increase of the leading mobile payments app. a sevenfold increase in the last few years of the second mobile payments app. those already hold balances largely outside the banking system. similarly, we have seen those having some implications for cash usage. any future evolution of the financial system with digitalization is going to lead to some diminished use of cash and some diminution of bank deposits pin that is also touched -- bank deposits. that is also true of stable coins. you could see some reduction in bank intermediation and bank deposits. we want to think holistically about it. it is important to think about potential limits on central bank

digital currency holdings. whether to pay interest, that would be another way to make holdings of central bank doodle currency only -- bank digital currency only for payments in ways that would not compete with deposits. there are a variety of ways people have been thinking about designing these so they would not diminish deposits in the banking system. >> thank you. do you think the central bank digital currency could increase the threads of the diminishing role of the banking system in our economy as we know it? vice chair brainard: i think that question about whether or not the central bank digital currency would be interest-bearing is an important one. i think there are a variety of reasons to think it would be

preferable not to have in interest-bearing digital currency. the one you mentioned is one of the most compelling reasons. it would be less attractive than deposits if it were not interest-bearing. consumers are accustomed to making payments on mobile apps. without interest on those balances. it seems like a natural way to go to me but it is one of the design questions are paper raises and we ask feedback for in the comments. >> thank you very much. i see my time is just about to expire so i yield back. >> the gentleman from the california who is also the chair of the subcommittee on investor protection, entrepreneurship and capital markets is now recognized for five minutes. >> thank you. cbdc's will not meet the primary

need that is inspired to be met by cryptocurrencies. cryptocurrencies, the name tells you everything. crypto means hidden. currency is money. it is designed to meet the needs of those who need hidden money. drug dealers, sanctions evaders, human traffickers and especially tax evaders. there is a second -- and i don't think central bank digital currency will help those folks because you are going to enforce a familiar customer and anti-money laundering rules. there is a second need met by cryptocurrency. those who may not care whether they hide their own money but they want to hit high risk investment wager on whether other people will want hidden money and the price of crypto goes up. mr. mchenry asked what could a cbdc do and i would point out

that accounts of over a quarter million dollars are not insured or the federal government. if you want an account rather than -- you could buy it and sell it and use the money. you want in the account money and take a zero risk and you have more than a quarter million, cbdc's could do that but there will be a disadvantage that i think mr. governor brainard, it's logical he would focus on digital currencies, but i want to tap your knowledge on stable coins. we have seen terra was not terra firma, it was terrma incogita. i am concerned terra's investors are being told it is one to one

with cash reserves. we do not know there are any reserves at all, but if we take at face values their results out of tether, they own commercial paper cryptocurrencies which could go up or down any day and a lot of investments in the notes of chinese real estate companies, which are highly impaired. earlier this month the treasury secretary testified for congress to take action and laid out a framework for doing so. congress has been divided, as you may have heard. we may not be able to pass anything. is there anything you or the regulatory agencies can do to protect those who think they are buying something stable and in fact are buying anything but? vice chair brainard: i've certainly been focused on the potential unstable nature of

so-called stable coins for some time. i do think it's the first best answer for congress to legislate specifically a regulatory regime for stable coins. i do believe we have just seen in the last few weeks exactly the kinds of risks we have open talking about for some time. a collapse in the value of the stable going -- stable coin, a stable coin moving off its one-for-one value because of lack of transparency and to the reserve assets supposedly underlying the stable coin, although the things we have been talking about. -- all of those things we have been talking about. i think the principles for regulating are good and would be

first steps. there are consumer protection risks, investor protection risks -- >> i want to sneak in one more question. we tend to focus on the financial services system, but the real impact is what impact financial services has on the financial economy. we want home loans made. if we had a cbdc, would that cause deposits to move out of banks, particularly community banks and credit unions and into the fed in a way that would provide less money available for the loans we want banks to make? vice chair brainard: i think with the right design features that could be avoided. we already have a payments app that would operate quite similar to central-bank digital currencies. the financial system is already moving in that direction. by doing things like not having interest on a digital currency,

potentially limit how much people could hold, it would confine their use to payments and not impede those functions of a vibrant banking system. it is important for banks to be intermediaries in any such future system. >> thank you. the gentleman from missouri is now recognized for five minutes.

if we don't have legislation, what other forms toward a nod of approval would you accept? a letter from the admin astray should, congress -- the administration, congress? can you give me a more definitive answer on this please? >> let me just repeat what we have said, the federal reserve discussion paper that was released in january said that the federal reserve would not move forward without strong support from the executive branch and congress, ideally in the form of authorizing legislation. >> ideally here, is it the only form? are there other ways you would consider approval from congress and the administration?

i want to nail this down. what do you think it takes to make this happen? vice chair brainard: i believe in the executive order on digital assets, the department of justice responsibility for opining on this topic, others who are lawyers are probably better placed to give you a very precise answer. i can tell you that we believe that congress should be very engaged on this issue. that's why i'm so delighted that you are holding this hearing today. there are a lot of important questions i think you are asking here. our job is to make sure, at least the part of this i think i have some responsibility for, is to make sure any decision you take is well-informed.

that is why we put out session papers. that is why we think it is important to have technology research. i would hate for congress to decide five years from now, federal reserve, you need to catch up. china is out there, the ecb is out there, and we would be serving you very poorly. >> okay, thank you. you have opened up another question for me with regards to other countries, china, europe, uae, that are acting in this space. the fed is thinking about doing something with consent and approval, our direction from congress and executive branch. my question is, do you think you can move fast enough to be able to compete with these other currencies? if not, do you think the private sector, which we all agree can

innovate and do this much more quickly, that if you worked in concert with them, the innovation they could come up with may make this more competitive more quickly? vice chair brainard: in any circumstance, we operate alongside the private sector. that is true of all of our payment systems we operate today. it is true of the coexistence of cash and central-bank money. that is one of the great strengths of our system. in any circumstance, i would see the potential digital dollar as creating a neutral settlement layer that would allow our private sector to innovate more effectively and rapidly. if i think about where other

countries are, by doing the kinds of technology and policy research and soliciting input today, i'm hoping that we working with the private sector -- >> can you give me an instance of how you are working with the private sector? vice chair brainard: in all of the work that we do, we have private sector partners. now for instance we have a group of private sector partners that help inform the design of our system. all of our payment infrastructure is kind of a neutral infrastructure that allows interoperability between private sector solutions. that is how i would continue to see the result -- see the role of the federal reserve in the future. >> the gentleman from

connecticut is now recognized for five minutes. >> thank you, madam chair. thank you, dr. brainard, for your presence here. i am excited we are having this conversation and am deeply appreciative of the work you have done. i studied the minority engagement letter of may 18. i want to get your view on some of this, just for the record. the minority is very focused on the tests. tori authority. -- on the statutory authority. this is a big deal. i want to make an observation. the minority accused you of failing to identify the payment system and efficiencies, i think i'm quoting them, in their let ter. they write about identifying the problems in the current payment

system. that is a hard question to answer. there are still millions of americans who don't feel comfortable using commercially backed payment system. they tend to be immigrants, lower income people. that is correct, isn't it? vice chair brainard: yes. >> and i suspect that is always going to be true. i think it is important for them to have the option to do it, but there is something unique about the full faith and credit of the u.s. government, and that is why people use physical currency. i was a technology banker in the 1990's and watched the internet develop. the truth is in the mid 90's we had no idea what the internet was going to be. we had no idea and the late 90's that someday the internet would enable your refrigerator to text you at your office to tell you needed more milk. i'm not sure we would've looked at travel agents and said that's a clear inefficient system at

the time. so my point is we just don't know, but we would be making a terrible mistake if we stood in the way of innovation because the problems of today don't indicate where this may go. the second issue, i worry about the minority because i think the outcome here is one in which the federal reserve provides a foundation upon which the private sector innovates in a big way. the government should not squeeze out the private sector, but i waved this thing around a lot, the iphone, but this is the metaphor for what we are doing. this thing is made by a private company. it has apps and semi conductors that created immense wealth in the private sector, but this thing is cool because decades ago the federal government invested a huge amount of money in semi conductor research. the federal government created

the arpanet which led to the internet. the only reason location services work on this device is because the u.s. government maintains 31 global positioning satellites above our heads. the reason i tell that story is because this is the story of innovation. you can call it a partnership, a foundation that the government sets that the private sector builds on, but that is the nature of innovation. i'm a general cryptocurrency skeptic here, but i don't ever want to do something including demanding use cases that are specific at a time we could find ourselves at a competitive disadvantage. if we wake up six month from now and the eu has created a digital cbdc approval and of the euro and the private sector in europe is innovating on top of that foundation, could we find ourselves at a real innovative disadvantage?

vice chair brainard: yeah. >> and if that happens and the apps that get built on a euro, sterling cbdc become attractive, is it possible people around the world might migrate away from the dollar as a use currency? vice chair brainard: i think it is, yes. >> so there is a real risk to our traditional position as an innovator if by having some ideological split that does not exist between the government and private sector we allow -- i don't worry so much about china -- but europe and the u.k. can move ahead of us. there is some really important risk within the cbdc. we do not want to dis- intermediate the banking system. we don't want panicked moment. is it possible that in an intermediate system that you

called for with wallets that are held in the private sector but captain the amount that one can hold -- capped in the amount that one can hold, can you perceive of a structure like that which creates no risk for the existing financial services system? vice chair brainard: certainly. in the research we have done, it is the lack of interest that would help to protect the banking system from any disintermediation. >> thank you. my time has expired. >> thank you, madam chair. governor brainard, thank you for your insights into this important topic. i wanted to follow up on questions about the need for congressional authorization. you reiterated that your january

report states the fed would not issue a cbdc without congressional authorization. in that paper the fed committed to moving forward the cbdc only with clear congressional support "ideally in the form of a specific authorizing law." you reiterated that today. i want to get into this executive order you mentioned. that march 9 executive order requires the attorney general in consultation with the secretary of treasury and chairman of the fed to provide an assessment of whether legislative changes would in fact be necessary to issue a central bank digital currency, should it be deemed appropriate and in the national interest. this to me suggests the administration is not yet convinced that congress has a role here. tell us how the fed is coordinating with treasury on this. if treasury and the attorney general take the position that congressional authorization is not necessary, will you and your

general counsel commit to pushing back to protect the important role of congress? vice chair brainard: i can certainly say that you are right, that is what the executive order asks for. no, i have not been engaged in any of those conversations. that is not my expertise. it would not be likely. i believe there have been some staff level discussions between the federal reserve, department of justice and treasury. i don't know where the discussions are going to go. it's very hard for me to speculate on that. >> what i think congress is expecting, and i hear bipartisan support for this, is your general counsel and chairman

powell has the executive order requiring him to take the position you are taking today, that congressional authorization is required and we will be following up with you on that. on the positive substitution concern about a cbdc. you mentioned the key objective of the cbdc is financial inclusion. you are concerned this might compromise access to credit, a cbdc would, compromise access to credit, especially in rural community bank dependent areas like my district, it may be harmful to the very people we are trying to help. talk about that a little bit more. as you do, i'll just quote the fed itself, " a widely available cbdc could serve as a close substitute for commercial bank

deposits or other low risk assets. a shift away from these assets could reduce credit availability or raise credit costs for households, businesses and governments." vice chair brainard: let me start by saying that i'm very focused on the role particularly of community banks in rural communities and the unique role they play in providing credit to small businesses. it is a very important link to financial inclusion for rural communities. i certainly care a lot to make sure our community banks are vibrant. >> can i reclaim real quick and get to your point about intermediation and caps? i know that is your solution. i'm worried that even an intermediate cbdc would still result in $720 billion in

deposits leaving the banking system. that would infect impact community banks the worst because 46% of community bank deposit accounts have less than a $5,000 balance. vice chair brainard: what you can already see today is that there is a big migration of consumers, particularly young consumers to mobile apps for payments, particularly for p2p payments. we have seen a tenfold increase over the last few years alone. you saw stable coins being prominent in payments, that would also lead to migration. i think we need to think broadly about the future of community banks and the vibrancy of deposit holdings in a world that

is rapidly digitizing on payments. of course, as you noted, any system, any design considerations would include a permanent role for banks of all types as intermediaries. we certainly are thinking a lot about, are there kinds of restrictions like interest payments, restricted caps, that would help guard against risk in moments of instability. >> the gentleman's time has expired. >> so many questions. >> the chair of the task force on artificial intelligence is now recognized for five minutes. >> thank you, madam chair. there has been some discussion about what problem might this be solving. if everyone had access to a fed

account or fed backed table coins which were widely used for consumer and commercial payments at negligible costs, roughly how much wood vendors and consumers save in credit card fees? vice chair brainard: i don't have a specific estimate for you, but certainly transaction costs are very high currently. >> if you would get back with an estimate, i would appreciate it. that is a big potential consumer benefit. it seems to me the first safest step here would be stable coins issued by a regulated financial institution that were 100% backed by fed reserves. that seems like the safest thing you can imagine. the main thing that would be required for this to happen is that the fed would provide an api to verify in real time the reserve account balances so that any time anyone was going to mint a stable going, the minting

process could not complete until the fed verified the updated account balance was in fact on reserve. it seems this should be a fairly straightforward thing. i would not be surprised if the parts are already in place in the regulated financial system. this approach would also neutralize any monetary effects of changing stable coin balances. from that point of view it would be a pretty safe thing. what would the residual dangers in an initial approach like this? is this really a project that would take five years? vice chair brainard: private stable coins could and are growing in usage every day. what would be different, if you say, an entirely reserve back to stable coin with guardrails

and regulations around it would mitigate those financial stability risks, it would not mitigate risks of fragmentation of the payment system or of walled gardens. that is another important aspect of thinking about whether you want a neutral settlement layer that might underpin a variety of stable coins and other private innovative solutions. and fragmentation of the payment system is costly, as we know from previous periods, when it makes it difficult to move from platform to platform, it introduces large inefficiencies. similarly if you think about the cross-border case, where i think banks are particularly focused on lowering transaction costs, you either have a large number

of stable coins, in which case you might have some fragmentation and inefficiencies, or you end up potentially with one very very concentrated stable coin, which would require even more regulatory oversight. [crosstalk] would lead to the same intermediation risk in digital currencies. >> in your testimony you highlighted the discussion paper indicated a fed issued cbdc would best serve the needs of the united states by being widely transferable and identity verified. you mentioned that you had legislation to proceed with cbdc 's. do you feel you need legislation on the digital identity front to make this a realistic possibility?

is that a necessary part of any cbdc program? or are the standards in place already sufficient for that? vice chair brainard: two things. one, we talk about trying to strike that balance between privacy and identity verification by leaning on the current system that we have with banks as intermediaries, where banks are responsible for identifying or verifying identities and consumers as a result have privacy, that there is no direct visibility into consumer transactions on the part of the government. you are asking a broader question about digital identities. that is outside the purview of what the federal reserve is responsible for. i think it's a broader and very important question. >> the gentleman's time has expired. >> okay, thank you.

>> the gentle man arkansas is now recognized for five minutes. >> thank you, chair waters. my congratulations, dr. brainard, as you are now our new vice chairman for regulation at the fed. this committee's work on digital assets has been one of the bright spots in recent years and i thank our members for their hard work. i think our committee is the best informed members of congress on digital assets. and that is through strong bipartisan engagement on that in the past few years. i appreciate particularly the work of the ranking member and chair of the committee for working on a bipartisan basis here. i have been urging full consideration of the central bank digital currency or cbdc for about three years now. last year i introduced with my friend from connecticut the 21st century dollar act to make sure the u.s. government has a

strategy to maintain the dollar as the primary global reserve currency now and well into the future, with or without a central bank digital currency. in 2019, congressman foster and i authored the central bank digital currency study act, which directed the fed board of governors to study a potential cbdc's impact on consumers, monetary policy and the u.s. financial system. while that bill has not passed, we are here today talking about precisely that kind of a study. i am delighted to see the work by the fed, both with the private sector and mit to conduct this study. i think i heard dr. brainard confirm that they would not issue a central bank digital currency without clear legislation from congress. so i thank mr. hines and mr. foster for working with me on

these issues. looking at the fed's report, one quote stood out at me. the federal reserve bank does not authorize a direct federal reserve account for individuals and such accounts would represent a significant expansion of the federal reserve's role in the economy. just confirming with you, you stand by that and you don't support direct consumer accounts at the fed? vice chair brainard: yes. i think our statute is clear on that. >> thank you. and it seems like a clear indication to me also that the fed understands that if a cbdc were to be created in america, it should be intermediated through the private sector where his companies, not the government -- whereas companies, not the government would issue accounts and just a wallets to facilitate the management of cbdc reserved for the private sector.

is that also your confirmation? >> yes. >> so we have been talking a lot about consumer benefits and about payments being reduced in fees, for example, dollar exchanges like monogram and things like that. a big part of our hearing a few years ago with libra and facebook at that time, but i wouldn't call current digital asset transfers on blockchains cheap. we decided are inexpensive? >> the numbers i have seen are actually quite expensive. >> also, settlement times are long. settlement accounts are also not instantaneous, is that not correct? >> that is correct. >> so there are operational

issues. as you say, a lot of work to do before we just instantaneously think this is going to be successful. are you testifying in a general way that you really prefer a cbdc over a stablecoin innovation regime? is that unfair for you to say that that is your view? or is that a fair way to describe it? would you prefer a u.s. government issued cbdc through an intermediary overseen by the government versus a number of stablecoins? >> i really see the potential for a digital dollar as being complementary to a more stable, efficient system that would include stablecoins and commercial bank money. i really see them as potentially enabling private-sector innovation and fully

complementary. and to your earlier question on the blockchain, obviously the blockchain has a real inefficiencies associated with the way that it verifies any kind of ledger with a central permissioned authority. >> i have got some additional questions that i will submit for the record. thank you. >> the gentleman from georgia, mr. scott, who is also chair of the health agriculture committee , is now recognized for five minutes. >> thank you, chair lady. dr. brainard, i am also, as the chair lady said, chairman of the health agriculture committee in addition to being senior member of the financial services

committee. 20 years. it has put me in the private of two essential things, that we cannot survive without -- food, and money. access to money. access to food. so let me share with you why i am worried. because we have unbanked, underbanked, we have those people who don't have access even to the infrastructure of our financial system. i am also working and concerned about the failure of us having financial education to educate people. we are making drastic moves with this cryptocurrency and the subject we are addressing today. so let me ask you so you can

address my concerns, how would a fed-backed digital currency address the various reasons that our low-income consumers say why they're being unbanked? they say specifically that they have lack of physical branches in their communities. what role would that be? they say there is a minimum balance requirement. and then also this general distrust of our financial system . how do you address that? you made a statement in your report, you said that a central bank digital currency could have helped millions of unbanked and underbanked americans during the pandemic. you suggested that if the federal government had the

option of providing digital cash , people without a bank account could have received payments, relief payments faster and more efficiently. how can you back that up? >> so i think the reasons that you noted are the reasons that we see in our surveys, fdic surveys, why more than 5% of our population doesn't have a bank account. and that does include cost-related concerns first and foremost, such as minimum balance requirements, unpredictable or high fees, as well as a lack of trust -- he also noted lack of convenience, lack of branches potentially. of course, there are some products like the bank on

initiative, banks are offering low cost, low-risk consumer checking accounts. i certainly hope that will improve financial inclusion. that many consumers are also moving to payments methods outside the banking system because they are accessible, they are on apps, and because they don't have those kinds of minimum balance requirements. so it is possible that a digital dollar issued by the central bank could be part of an ecosystem that lowers transaction costs. >> mace, i only have a moment here. >> sorry. >> how do we overcome the challenge of having unbanked and underbanked communities?

communities view a central bank digital currency exactly the same as if they had a bank account. >> central bank digital currency is really more like a cash analog. it is really in the digital world, the equivalent of holding onto cash or currency. it is direct, central-bank issued, safe money. consumers hold that right now. >> i have seven seconds. please make a point to address these. we have got to bring everybody along with us, including the unbanked and underbanked. until we have that done, we cannot move ahead and the functional bill all americans. >> thank you.

the gentleman from ohio is recognized for five minutes. >> thank you, chairwoman. mr. davidson and madam chairwoman and ranking member mchenry, vice chairwoman brainard, thank you and congratulations. testimony. i am glad we are doing this hearing. i wish we had scheduled it we were in town. i think i, in-person adds a lot of value. but i am glad we are doing it nevertheless. earlier when my colleague from kentucky was talking with you about your inquiry from the executive ranch, you said you wouldn't be the subject matter expert. if that is the case, why are you our witness? you seem to be handling the questions well. so who is the subject matter expert the administration should be working with, if not you? >> i think it is our general counsel's office, would be the

group of people that interpret our statutory language. >> ok, so you mean under statute, not on the subject at hand, central-bank digital currencies? >> no, my apologies, i was referring to that specific question about statutory language. >> wonderful. i appreciate the chance to clarify it. when you talk about just recently with my colleague, you pointed out that the analog is more to cash. if a person holds $100 cash in their wallet, is that something the fed would consider a vulnerability to public safety that must be reported or monitored? >> no. there is a really important difference in terms of the anonymity of cash.

and of course in any future state, cash would continue to be an option for consumers. >> is it a vulnerability if a person holds $1000? is there a point when holding cash is a vulnerability to the financial system? >> you know, the financial system and consumer preferences are moving away from cash. this is really just an observation about what is actually happening. we are very committed to the provision of currency. we have got a lot of really important responsibilities in that regard. >> i ask the question that way because frankly, while cash is not illegal yet, there is an effort to make the digital equivalent of cash illegal. this is a rule making attempted

under secretary mnuchin and it is now contemplated under secretary yellen, who would ban self custody of digital currency , which is essentially the same as self custody of physical currency or cash. so, why do you believe there is scrutiny there? >> that is really, it sounds like something treasury would be best placed to address. >> as you contemplate central-bank digital currencies, what would you consider a permission does peer-to-peer transaction? because that is the nature of cash. if we are trying to preserve that, wouldn't that make any future central-bank digital currency essential to preserve those characteristics? >> that is one of the profound questions that we raised at discussion paper.

there is the tension between potential anonymity and concerns , as noted by other members of the committee earlier, about controlling illicit activity and anti-money laundering. >> that's where the government has almost banned cash, although not entirely. two mr. scott eggs concern, the -- two mr. scott's concern, the unbanked and underbanked community are already distrustful of banks and they turn to not. they want to stay with cash. i note frankly in a distant point, 40 of my democratic colleagues sent a letter to google because they were concerned that geolocation tracking could be used by people to regulate abortion. the concern is the surveillance state. well geolocation can do that, we

have made cash almost impossible to use and i think that hurts the unbanked and underbanked most. lastly, if you turn the central-bank digital currency into this creepy surveillance tool and you don't preserve the permissionless characteristics of it, it is going to hurt -- it is relatively what china is developing, and we should not imitate them. we should protect america's way of life. >> thank you very much. the gentleman from ohio who is also the chair of the subcommittee on diversity and inclusion, is recognized for five minutes. >> thank you very much, chairwoman, and i would also like to thank vice chair dr. brainard for appearing before our committee today. much has been touched on, but it gives me a great opportunity to segue from esther himes, mr. davidson, and mr. scott. when i think back to technology,

in my district, because of the project hopefully that will be here, we will have a small microchip that will control just about everything that we are doing. i put this in the same alignment would we start talking about whether it is sandbox for coinbase or any other form of cryptocurrency, is education and awareness. we know what happened with the stimulus checks. we had a great idea, we got money out there, but because of lack of education, the lack of banking for those who had bank accounts with businesses but to be in good standing meant that you had to have that much money -- my question is, how do we get the underbanked and unbanked educated on this? i am hearing people well-educated on the financial services committee.

i am a skeptic. many would say this is the wild, wild west. i believe it's the new frontier. i am not as a skeptic. i just returned from a codedale in the caribbean with congresswoman waters and got probably the best education on cryptocurrency there with many experts in the bahamas. so what is our education and awareness planned? for everyone, but especially for the underbanked and unbanked? then i will give you my next question and you can roll the response in. you have touched on this in different ways, but when we look at 85% of central banks, that is a good portion that are currently exploring digital currency and they end up issuing them. theoretically, say the united states is not, how does that affect us in no international

landscape? >> let me quickly respond to the second question first, i think it is very important for your committee and for congress generally to be asking that question. i don't think we can take the global status of the dollar for granted. in a world where other major jurisdictions to the issuance of their own digital currencies, it is important to think about whether the united states will continue to have the same dominance without also issuing. it is possible, but it is a very important question. >> and one other thing, broadband. this is a yes or no, is broadband important for us to be engaged in this digital currency world?

>> although off-line usage is still an area that will be important to explore for areas that don't have good coverage. >> good coverage is the object word. let me remind everybody didn't necessarily support the infrastructure bill, that as we move forward, broadband was a part of it. as we keep coming back, we need to think about that in relationship to how we survived eventually. thank you. i yelled back. i am not sure what my time is. i yield back, madam chair. >> thank you, the gentle man from ohio, mr. gonzales, is recognized for five minutes. >> thank you, madam chair, and thank you dr. brainard for being here and sharing your thoughts. you talked with mr. mchenry, two of the benefits to a cbdc being

avoiding fragmentation and then instability and you cited the recent instability in the stablecoin market as your example for that. just so we have a base level of understanding, would you agree that one, the stablecoin that broke and basically went to zero, that was backed by low-quality assets or at least volatile assets? it was an algorithmic stablecoin not backed by fiat currency in any way, shape or form?>> yes. >> ok. would you also agree that the other one that you cited that broke the peg for a period of time, it doesn't have the same transparency, or isn't as transparent from an asset-quality standpoint as may be we'd like in an ideal world? would you agree? >> yes.

>> ok. would you also agree that another prominent stablecoin which is more transparent and claims to have higher-quality assets did not rake the -- did not break the buck? >> yes. >> it leads me to the conclusion that what is a well-regulated stablecoin where we have high standards for quality of assets, liquidity, transparency, where we tighten the definitions around what a coin is and what it can hold? would it solve the instability issue? >> it will solve it. a very robust set of regulations akin to bank-like regulations would solve for bank run type of

instability, yes. >> so quality of reserves, liquidity, transparency, redemption, these are the things we should be talking about when talking about well-regulated stablecoin? > it will not solve the presentation problem or the interoperability problem, it will not solve potential -- >> i want to get to the fragmentation point for a second. he also said you are in favor of a world where we have coexisting alongside of each other, cbdcs and stablecoins. when you say what you just said about all these other problems that don't get some bargaining cr for this coexistence, help me understand why that is not speaking out of both sides of your mouth. >> let me just say first, one way or the other, the decision on whether to issue a cbdc lies in the future. in that world i would see a cbdc

as potentially complementary. >> let me just ask really fast. in a world where we have unregulated stablecoins, you have said that leads to fragmentation. so help me understand why a cbdc interview does not lead to fragmentation? >> a currency that is backed by the full faith and credit of the u.s. government naturally provides interoperability between different platforms. so, in that kind of a world, he would still have a digital asset that would have the backing of the u.s. government and

therefore would naturally be that kind of neutral settlement asset layer. different stablecoins could have different attributes and be apart of different ecosystems. you would have that basic interoperability built in. >> i guess i am having trouble still understanding how in your view, these could coexist in there not be fragmentation. my first -- my final question, have other central banks reached out and expressed concern that the u.s. does not have a cbdc? >> other central banks have certainly asked us to participate in some of their work in the hopes that the u.s. would -- >> specific to the reserve currency status question? >> specific to being one of the most important central banks

that values privacy and transparency and a set of values around digital currencies that they share. >> thank you. >> the gentleman from illinois, mr. casten, who is also vice chair of the subcommittee on investor protection, entrepreneurship and capital markets, is now recognized for five minutes. >> thank you, madam chair. really enjoying this conversation. thank you vice chair brainard for taking your time today. i want to start with some structural issues that i am having a hard time getting my head around as we are having these conversations. for a u.s. cbdc, correct me if i am wrong, for that to work, it always has to be a liability of the federal reserve, is that understanding right? >> yes. >> ok. so if that is the case, does that not mean that from the

money supply perspective, it is always limited to money supply, there is no multiplier effect? the banks cannot lend against deposits, it is always limited to just a money supply issue? >> it would be akin to cash. it would be the digital analog of cash currency. >> i asked that because -- i am getting to a larger question, i am hard-pressed to think of how a private bank would ever have a specific incentive to take cbdc deposits. i can't imagine the interest rate that gives them the same incentive they would have if they can lend against deposits. what is the case for why the private banking sector would find cbdcs invaluable in their business model? >> so, banks are very important for payments. consumers are moving away from

and to some degree, using their deposit accounts for payments. we have seen that kind of growth in some of the leading mobile payments apps. so i don't know, again, i think the reason that we are trying to think in the future about this is because we don't actually know how the social system is going to evolve, but i would imagine that banks would continue to be very active in the payment space? >> i am not raising these as criticisms of your work or our work. it is just that i understand that as an intermediary of money-charging fees, different types of currency are fungible, but the opportunity to make money in a bank, if i

deposit a thousand dollars in the bank and the bank can lend out $800, i can see that opportunity existing in the cbdc space. that is such a huge engine not only of the banks, but our economies. let me shift if i could and let's talk about stablecoins that are not cbdc stablecoins. in a world where we have satisfied that there is no differential money laundering advantage or payment-time advantage, is there any reason why a stablecoin is an fundamentally present the same liquidity and risk issues as a money market fund does and should have the same production surrounded from a depositor-investor protection perspective? >> yes, you could think about it as a money market fund, and you could think about it as requiring even higher protections as a kind of tokenized deposit. yes. >> ok. the reason i ask those questions, and i don't mean this to sound like a leading question, but i am somewhere between congressman himes and congressman sherman.

i love the new technology, i think there is sex appeal, i think we should embrace these things. i also agree with mr. sherman that there is a potential for a lot of grooved on these things -- a lot of grift on these things. these devices. they are attracting a lot of relatively unsophisticated people. from where you sit as a vice chair, if we have this thing that is very technologically sexy, lots of people coming into it, there are sophisticated players taking advantage of it, do we have enough visibility into the transactions that are going on in these markets, whether inside or the wallet to ensure the people aren't essentially running a whole lot of pump-and-dump schemes, for lack of a better word?

taking advantage of insider information? do we have enough revelatory protections to understand what is happening? i have my concerns and i would love your thoughts in the time you have left? >> we certainly don't, at the federal reserve. i am guessing several of the other financial regulators might share that concern. >> i would love to follow up, because it scares me that we don't know how to actually identify how big a deal that is. i am out of time. i yield back. >> thank you very much. the gentleman from georgia is now recognized for five minutes. are you unmuted?

he is . muted. we will go on and then we will get back to him. >> can hear me? without specific authorizing law ? >> yes, i can hear you. >> ok. i apologize. thank you madam chair, vice chair brainard, thank you. sorry for the technical glitch that's what happens when you are still doing things remotely. i know this has been touched on, but i want to make sure we have a clear understanding in

congress about the cbdc white paper. and the intention of the federal reserve to potentially move forward. as i am sure it has been stated, the white paper states that the federal reserve does not intend to proceed with the issuance of a cbdc without clear support from the executive branch and from congress, ideally in the from of a specific authorizing law. that is a very loosely worded phrase and in my estimation, the federal reserve doesn't intend to proceed with the issuance of a cbdc without clear support from the executive branch and congress ideally in the form of a specific authorizing law. could you touch on or confirm that the fed will not proceed with a cbdc without specific authorizing law from congress? what is the intention? >> i think the intention is just as you described it.

we don't intend to proceed without the support of the executive branch in congress. it would be ideal to have authorizing legislation specific to this. it is really as simple as that. >> if there was authorization in the form of a law that would indicate clear support for congress but if there wasn't an authorizing law, would there still be an intention to move forward in some way? >> we really want to see support coming from both the senate and congress. [indiscernible] >> i apologize. i think somebody is still on mute. >> so, i said that we certainly

want the support from the executive branch, and congress, before moving forward on actually issuing a digital dollar, if the decision were taken to move in that direction. >> ok. we will keep an eye on it. the words "we don't intend" leaves a lot of ambiguity. i would like to hear that we are not going to do it without, but understand. we will keep our ira. we will move onto another subject. one of the fed's cited reasons why cbdc could be helpful is that about 5% of households are currently unbanked. but the fdic's data indicates that many of those simply do not want a bank account for various reasons. so really massive government , a undertaking with a cbdc would be vastly out of proportion with the relatively small scope of the problem so in

my mind, that issue of digital currency alone would not help the unbanked. the cbdc would have to be paired with some fed-sponsored checking accounts to actually have an impact on that, and i think that would be a widely misguided idea. our payment systems already work well for the most part. so the best thing to do is to make improvements to the existing system rather than just completely overhaul it, in my estimation. another concern with the cbdc is cyber security which is something that i've been very interested in since i have been in congress, coming from the i.t. sector. the federal government is probably the single biggest cyber risk and virtually ever y federal agency has experienced a data breach. my question is, if the fed ever did proceed with the cbdc, it would be catastrophic if cyber criminals were able to manipulate our currency.

how can you ensure that it would be protected against cyberattacks? >> yeah. so, operational and cybersecurity risks are an ongoing challenge for all payment systems, and i think any digital dollar would be the same. and of course, we already responsible for providing critical pieces for the wholesale payment infrastructure and the retail payment infrastructure that we have provided both to the public and the government. i would call your attention to fed wire, fed ech, and we already have really put his responsibilities in the payment system in collaboration with the private sector. we have very significant cyber security responsibilities there

and we recognize how important those risks are and how important operational resilience is. >> thank you, madam chair. i yield back. >> thank you. the gentleman from new jersey, mr. gottheimer, who is also the vice chair of the subcommittee on national security, international development, and monetary policy, is now recognized for five minutes. >> thank you, madam chairwoman. thank you, vice chair brainard. thanks for being here to discuss digital assets and federal reserve's research on central-bank digital currencies. vice chair, as you know, many americans are already storing their hard-earned dollars and privately issued digital assets like stablecoins as we've been talking about today. while some stablecoins are less stable than others, i believe it is possible to establish guard rails to ensure americans can distinguish stablecoins that are backed one-to-one with liquid assets, from others that have questionable or nonexistent

financial backing. my draft legislation the stablecoin innovation and protection act, would establish a definition of requirements for qualified stablecoins and in the bail, qualified stablecoins are defined as crypto-currencies, redeemable one-to-one for u.s. dollars. this legislation would reduce financial instability in markets , protect consumers, and support innovation in american fintech. it would create a pathway for both bank and non-bank to acquire a qualified status for stablecoins. do you believe that non-bank entities can be reliable issuers of qualified stablecoins? if they prove they are fully backed by cash for cash equivalents? >> yes. >> if a system of qualified stablecoins were implemented, what guardrails would you like to see in place for non-bank issuers'i think that the president's working group put

out a variety of requirements that would be important. they are focused on bank-issued stablecoins, but i think any set of stablecoins would need to have a similar very strong set of protections regarding assets , the actual consumer protections, investor protections, transparency, cybersecurity -- there is a very important mr. protections that would be very important for a stablecoin to be able to redeem reliably and not be subject to consumer and investor fraud and other reduction concerns. >> i appreciate your insight. i am looking forward to continuing the conversation there. i would like to shift if it is ok with you, a bit to discuss the need to support continued innovation in digital assets. and the federal recently

explored the potential benefits and risks associated with issuing a central-bank digital currency. the technologies that support digital assets are rapidly evolving, as everyone knows. this area of finance has been a great source of innovation in recent years. if one were established, how do you see the cbdc interacting with privately issued digital assets like stablecoins? >> having a digital currency that is backed by the full faith and credit of the u.s. government as currency is unique and it would be unique. and it could actually be an important support to a broader system of private sector innovation, much as the federal reserve today, that payment services it provides and the issuance of currency it provides undergird private-sector innovation. the comments we have gotten back

from innovators and pigments providers, they really talk about the potential for a digital currency issued by the central bank to provide a neutral settlement asset, a neutral layer in the technology stack that would enable interoperability and be a stable, underlying mutual asset. >> thank you for that. i yield to the remainder of my time. >> thank you. the gentleman from north carolina, mr. burke, is recognized for five minutes. >> i think the chair. vice chair brainard, thanks for being here today to discuss the fed's plan for cbdc, the digital dollar. historically the government doesn't have the best track record when it comes to innovative thinking versus the private sector.

government innovation seems almost like an oxymoron. so here is what i want to know, what is the fed trying to achieve by issuing a cbdc that the private market hasn't already been able to do? here is why i ask, when i look at private-sector innovations like stablecoins, i already see that many of the claims of cbdcs being achieved by stablecoin providers, for example, the u.s. dollar coin issued by circle. >> so first of all, there is no decision that has been made. we are exploring this topic. and there are risks of action, risks of inaction -- but the u.s. federal reserve uniquely can issue currency that is backed by the full faith in government. of course, no private entity can do that. so it just plays a different role. i think what congress has always asked the federal reserve to do is to play a role alongside the

private sector. that is why we have really important payment systems like fed wire. i think there is general recognition that when there is a completely secure, trusted asset that underpins the system private innovation can actually , be stronger and more robust . and so that is really the question here, is whether by being that neutral settlement asset, that foundational layer, it might actually lead to a greater ability for the private sector to add value and innovate. >> thanks for that. so there is some possible outcome where the fed would say that they don't need to do anything, the private market has this handled -- you could see that being an outcome? >> absolutely.

i think it would simply be different. going into the international payment space with a stablecoin as a kind of dominant digital form of the dollar when other central banks from other countries issue their central banks digital currencies, that is just a really different approach. but it is certainly one that some people would favor. >> so, what has you most underage -- what has me most concerned about this is the concern around financial freedom and privacy. without big brother keeping tabs . it is a universal right. i am not concerned that the digital pigment system issued by the government would fully protect users' privacy. what steps would affect peak to

prevent government from monitoring americans financial transactions, or prevent certain legal, with an l, legal transactions from occurring that the government deems high-risk or that the government just doesn't generally support? >> privacy is a huge issue. it is incredibly important and that is why the discussion paper we put out in january says that one of the core principles of any digital currency, digital dollar, would need to be privacy-protected. the paper talks about an approach that is like your bank deposits today, that there would be no direct connection between the federal reserve and consumers, that it would be an intermediate. banks can play the same role they played now with they having the transactions records, having

obligations in terms of the privacy of those transaction records, and being responsible for the refining identities. it wouldn't be different from the system we have today in that regard. >> thank you, vice chair. i yield back the time. >> thank you. the gentleman from massachusetts, miss ayanna pressley, who is also vice chair of the subcommittee on consumer protection and financial institutions, is now recognized for five minutes. >> thank you, madam chair. the creation of a digital dollar is certainly a hefty responsibility. this technology, if properly designed and administered, has the potential to promote financial inclusion, enhance consumer protection, and completely revitalize our public payment and banking services. today's hearing is on a cbdc, but i do want to begin by highlighting the currently outdated payment system that

brought us here. when families still have to wait days at a time just to access their own heart and money. while the u.k. switched to a real-time payment system back in 2007, the fed action for an entire decade. and the fed now system is not expected to be implemented until at least 2023 or 2024. vice chair brainard this delay by the fed has had devastating consequences for working families and some would argue has contributed to many people turning towards riskier systems like cryptocurrency stablecoins and other private options in search of faster payments why . why should we trusting the fed with the responsibly of designing and implementing a cbdc? given the fed's track record, is it safe to trust the fed? how do we know this project wouldn't face the same decade-long delays. >> i think fed now is going to be really important in terms of offering real-time payments. i agree with you, from the perspective of those small businesses and families that

need access to their funds the most quickly, real-time payments can have the largest effect. fed now did not get started for a long time, because of public debate of the nature that we're having here today. we are a public institution, so unlike a private institution, there needs to be support from congress and broader support among a variety of stakeholders. that is why fed now took some time to get that kind of support and get off the ground. but we are on track to deliver it this time next year. the private sector is quite excited. there was a lot of ambivalence in the lead up to that announcement. and i think it is a really important -- today there financial system is moving very

rapidly. it is very hard for us to see five years out. if we wait until five years to decide to launch, it'll probably be another five years before we could actually deliver. that is why it is really important to do that work. >> sorry, i have a couple of other questions i want to get in. i am just going to reclaim my time. i think the point here is that many countries have been able to set up a real-time payment system much more quickly and efficiently than us, and it is critical that our nation is needing the evolving needs of the digital economy. and let me be clear, the fed is not and has never been the sole federal entity responsible for issuing currency or administering public payments. that meant issues coins, and the postal service provided postal banking services for decades until it was shut down. today, treasury's bureau of fiscal service partners with banks to issue prepaid debit

cards to millions of unbanked and underbanked individuals. vice chair brainard, do you agree that instead of expecting the fed to solely shelter the burden of determining any kind of cbdc architecture, we should be bringing in other key agencies and actors into this process from the onset that are proven? >> we do partner with treasury on those prepaid cards, we partner with other agencies, so yes, we are in partnership with a variety of agencies. i agree with you. >> well, that is good to hear. we should be involving other public agencies like treasury, the postal service as well, the design and implementation of public -- of digital money will impact everyone and it is important that the process be as

democratic as possible with focus on financial equity and establishing faster payments while safeguarding the community's rights to privacy at the same time. thank you. and i yield. >> thank you very much. the gentleman from tennessee, mr. rose, is now recognized for five minutes. >> thank you, chair waters, and ranking member mchenry. thank you vice chair brainard for being with us today. the federal reserve in its discussion paper, included a request for public comment on several questions on design considerations as well as on the benefits and risk of the federal -- of the fed-issued digital currency. one question asked, for example, if cash usage declines, is it important to preserve the general public's access to a form of central bank money that can be widely used for payments ? if you responses that you are probably familiar with from

commenters include one -- that is a loaded question. stop phasing out cash. another -- cash is king. leave cash alone. some form of cash will always be necessary. we should always have access to nondigital forms of currency -- yet another -- there will be a need to use cash. and finally -- we should always have access to nondigital forms of currency. vice chair brainard, following up on the line of questioning from miss beatty earlier, if the use of cash continues to decline , how will individuals in areas that lack access to broadband utilize the central bank digital currency? >> first, let me just say that we are absolutely committed to continuing to issue currency and have a lot of investments in providing cash. so we are really just going to

respond to consumer preferences there. but we couldn't agree more that it is very important for access cash whether there may be less acceptance of cash in payments over time, that is not something we would have any control over. but we're certainly providing cash and we think it's very important to continue to do so. in terms of rural areas, areas that may lack connectivity, one of the areas of research is to think about off-line transactions, stored value cards . so it's a very important set of considerations about making sure that if there were some kind of visual currency, there would be access including off-line. >> you touched on my next line of questioning, vice chair brainard, are there any work

streams underway or analysis being done that you could comment on on the ability to issue cbdc and maintain an offline option for payments and transmissions? and could you comment on those? >> it is certainly something we are in collaboration with some of our peer central banks who are very focused on this issue as well. obviously for this to be an inclusive form of payments, there needs to be solutions that address off-line usage, usage when access to the internet is low or nonexistent. >> another question in the fed's request for public comments was, are there additional ways to manage potential risks associated with cbdc that were not raised in this paper? the responses included things like -- keep politics out of

monetary policy. the potential risk of corruption and abuse of centralized power and control over economic activity is too great. another 1 -- once the door to the kind of power a cbdc creates is open, it will be abused. and then finally -- don't do it. vice chair brainard, we saw how dangerous it can be when the government weaponizes the financial system for political purposes under the obama administration's operation choke point. more recently, the canadian government instructed banks to freeze accounts linked to the trucker protests over vaccine mandates. without appropriate safeguards, would they cbdc get easier for the federal government to block individuals it disagrees with from accessing the financial system? >> i really don't see a cbdc as raising questions that are different.

deposit in bank accounts, for instance. the paper that was released in january, it particularly talks about an intermediary model akin to what we see with commercial bank deposits, where the central bank doesn't have any direct interaction with consumers, doesn't see transactions by consumers, but there are intermediaries, including banks, that would be responsible for both identity verification and for keeping that transaction data private. so in that sense, i don't see it as any different than the issues that are raised with commercial bank deposits. privacy is one of those areas that is most important to think really hard about. we asked some really important questions there and we have some really good answers. >> thank you. i appreciate your insight and i hope to hear more going forward.

>> thank you, from michigan, is now recognized for five minutes. >> thank you, chairwoman. thank you, vice chair, for being with us. i know that given the reliance of electricity and internet access for a functioning central bank, digital currencies, many folks are not touching on their impact on crime rate. i truly believe the cbdc must take -- their impact on climate. i truly believe the cbdc must take into account severe weather events and climate change impacts. over the last several years, i have been alarmed at the companies like greenwich and react, reactivating a coal-fired power plants slowly for the purpose of mining energy-intensive proof-of-work-based , cryptocurrency. when our communities are flooding and our forests are burning, this is a huge step in

the wrong direction and cannot be a viable model going forward for the cbdc. vice chair, how is the fed approaching these challenges will develop the cbdc? >> i think that proof-of-work that is needed as a consensus mechanism in some form of blockchains are extremely energy intensive. any system where you have a central ledger or a central authority like a central bank does require that kind of energy-intensive consensus mechanism, because there is a trusted -- >> so we have these environmental concerns, and you are talking about proof-of-work. again, how are we addressing the climate? >> those systems would be

controlled by the central bank. [indiscernible] >> it would not require those consensus mechanisms that would use up all of the energy because of these servers would have to be involved in establishing that a transaction has taken place. so it really would not be very different from our existing payments infrastructure, which does require that kind of energy intensity. >> as you probably know, i represent the third-poorest congressional district in the country, significantly unbanked and underbanked population. throughout the pandemic, i saw how difficult it was for many of my neighbors who lack access traditional banking services to receive their stimulus checks or collect unemployment insurance and our traditional banking ecosystem really failed them precisely when they really

needed the money the most. i understand the appeal of digital assets and better payment systems. however, the fed's current cbdc proposal currently requires the use of a bank account. earlier today, you noted that you do not believe the fed has the authority to authorize direct accounts for individuals . can a digital dollar truly function as you mentioned as, quote,a cash analog," and how do we make sure we are removing barriers to financial inclusion, not shifting them around? >> i think when the central bank issued a digital currency, it can help reduce transaction costs and real-time payments, what it would need to also see in order to really make a dent on this very important underbanked and unbanked problem that we are all very concerned about, is there would have to

be other partners, i think, who are either nonprofits or public partners, who would be able to be that intermediary. and of course, banks are also now starting to offer or are offering low cost accounts. >> vice chair, i said this to my colleagues in financial, it is not for free to bank with these institutions. it actually costs money. that is sometimes the biggest barrier, right? if i have time, chairwoman, i don't know if i do -- but i know earlier this week, they fed's 2021 report on the economic well-being of u.s. households found that low-income and underbanked users were more likely to use cryptocurrency for transactional use, for obvious reasons, because of those barriers. while high-income users were most likely to use crypto poorly

-- purely for investment purposes. i am concerned that many individuals who are currently using cryptocurrency solely for financial access have no choice but to expose themselves to highly volatile ecosystems. are you guys addressing that. >> that was a very important finding in this survey i agree with you that it would be important not to have banks intermediaries, to potentially have other intermediaries. this might be 6 -- specifically to provide that bridge to consumers for a variety of reasons who are not comfortable with bank accounts. >> the general 1 -- the gentleman from wisconsin is recognized for five minutes. >> thank you for being here today.

a lot of the conversation seems to assume that the ease-of-use of other countries cbd sees poses a threat to the u.s. dollar dominance in the future. i think a big part of the dollars appeal of the reserve currency is the stable position of the united states. with that in mind, i am coming more and more concerned about the worsening fiscal position and the u.s. dollar central role in global finance. the cbo projected the growing danger posed by rising interest costs. we have taken on a lot of debt. meanwhile, interest rates are rising and by all indications are going to continue to rise. i think for reference, the last time inflation was this high, 40 years ago, the 10 year yield was

11%. we are not close to 11% today, but a lot of our forecasters including the cbo expect the cost of debt to rise. the cbo projections show costs riving from $400 billion to nearly one chilean dollars by the end of the decade. this is the number one issue that we should be discussing. particularly maintaining the supremacy of the u.s. dollar as the global reserve currency. over the course of today's hearing, i have noticed that a lot of the disagreement about the structure of the cbc stems from the problems cbdcs are supposed to resolve. in the fdic's survey of how americans bank, 30 6.3% of

unbacked respondents said they didn't have a bank account because they don't trust banks. 19 points out -- percent said thanks don't provide the services they need. so this would necessarily solve these problems. i would like your input from a global perspective, what problems or other countries attempting to solve through their implementation of cbdc? >> there are a variety of motivations. financial inclusion is among the problems that other jurisdictions are solving. there is declining use of cash that is a very important motivation. among several central banks and

the focus is on making sure that consumers households still have access, direct access to safe central bank money as the use of cash and consumer preferences and business preferences declined regarding cash. there are also the motivation of concern about fragmentation of the payment system and potential instability associated with the use of stable coins. there's also concern about the very opaque and costly nature of transactions. >> understood, but let's take nce financial inclusion for a minute because it's a topic we spent a lot of time working on thinking about, it's appropriate to discuss many of the reasons folks are not banking the united

states is privacy concerns. have countries -- other countries seen any success with the stated goals for example financial inclusion? >> the gentleman from illinois

is now recognized for five minutes. >> thank you and to the vice chair for being here. want to say it's important that we provide -- i want to applaud the federal reserve for taking the next cups -- next steps so the consumers are not left hanging in the digital age. i recently cosponsored an act that directs the treasury to establish a pilot program to

develop an electronic version of the u.s. dollar for use by the public. the bill has a major financial inclusion aspect because it will not require the use of bank accounts. over 7 million americans are on bank. he cash ensures that people will have the option to use it allowing users to facilitate online payments as the fed considers its digital currency design, it would seem that it has a two-tier system in which a consumer would need to go through a private banking institution to access a central bank digital currency. how will the fed work to ensure that all consumers have access

to a central bank digital currency specifically the unbacked and under bank population? >> that financial inclusion question is one that we have and will continue to focus on in our research. my sense is that because of the concern about privacy and wanting to have an intermediated solution, our paper recommends the question about who might those intermediaries be because it's very important for financial inclusion. the private sector can do a lot of innovation in the arena. so if you have a payment asset which is low-cost to use where you have immediate settlement,

there more likely to be nonprofits who may or other private into mayor dairies that may innovate on top of that in order to reach other bank consumers. it is also true as in your suggestion that other government agencies might be quite relevant there. it's not the tradition of the federal reserve and statutorily we are prescribed directly from providing those accounts. >> i would like to shift gears and discuss the use of stable coins for remittances. the federal reserve failed to use its own stable coin after we raised serious questions. however in 2021, -- a digital wallet pilot program which would

facilitate remittances using a stable coin. it is not an algorithmic stable coin. i wonder if there is a potential for it to lose -- that we have seen with the algorithmic sterile coin -- stable coin tara. would the u.s. central bank digital currency provide the potential for safer and lower cost alternative to remittances? >> remittances is one of the use cases that i think is cited most often in terms of the potential benefits of a digital currency that is certainly the main motivation of some foreign central banks and -- issue a central bank currency is for remittances.

as you know, remittances -- very costly. making it slow to make international remittances. that is one of the areas that is potentially seen as the most fruitful part of >> the gentleman from south carolina is now recognized for five minutes. >> thank you for being with us today and congratulations on your recent confirmation. i want to build on what my friend the congressman just touched on. i believe it is more critical than ever that we retain the dollar as the global reserve currency. the current state of the u.s. economy with skyrocketing inflation, the debt, and increasing erosion of the confidence of our position as a global leader are all causing some to bring to the question the future of the dollar printed

a few years ago, most had argued that there was no real alternative to the dollar. to begin to gain traction. recent events have brought forces to bear that could speed up potential alternative. china is working tirelessly to challenge the dollar and they are playing the long game. it is given them considerable leverage especially among development countries. that combined with the u.s. and eu financial sanctions on russia gives china the possibility of challenging the dollar far sooner than we may have expected. trust and confidence in the u.s. institutions provide the global community the ingredients to make the dollar the global reserve currency but china can browbeat their way past the trust to get a large portion of the world to abandon the dollar and this is extremely concerning to me. the recent cbo report showed our national debt would continue to

skyrocket to unfathomable levels. they tell us the debt will be 100% of gdp and 185% of gdp by 2052. admiral rim on said that the greatest threat to our national security is congresses inability to spend within its means and we have $11 trillion or $12 trillion of debt there but we are talking about tens of trillions more in a few years. the world needs to be able to trust that we can continue to pay our bills. the report paints a picture that it would make it much harder for us to meet that obligation.

do you agree that the debt is the greatest threat to making the dollars current status as a global reserve currency? >> the u.s. debt as a reserve currency is reflective of a host of things. the resilience in dynamism of our the quiddity -- economy. the trust in our institutions. our legal system. when you think about other residents from around the world, why would they wish to invest in the dollar? all of those things go into it and certainly i think the fiscal sustainability is a piece of that picture. we do have a very dynamic and resilient economy as we have seen in the last two years.

in terms of the payments dominance of the u.s., that's really the piece that i think a digital currency goes to, the dominance of the u.s. is not something we can take for granted as you noted there are other countries who would prefer not to be using dollars for international payments. i think they would wish to be moving away from the kind of international payment system that is centered around the u.s. dollar. in that context, if other central banks issue their own digital currencies, it is very important for the u.s. to be at the table, to have an important leadership role at the table in determining standards for those kinds of cross-border transactions and it may be very important for the u.s. to have

its own digital currency offerings. that's a question, but an important question that we should keep in mind as we are thinking about pluses and minuses of potential future state of the u.s. and global financial systems. >> thank you. >> the gentlewoman from texas who is also the vice chair of the subcommittee on diversity and inclusion is recognized for five minutes. >> thank you for being here with us today. discuss the implications of creating a digital currency, i'm not going to call it the fancy cbdc because a lot of viewers who are listening to us don't understand about what that means so i'm just going to talk generally about the digital dollar. if cash is king and dollar is king, then the queen that is

equal would beat the digital dollar. i don't mind for one that we have princes and princesses around the king and queen. whether it be cryptocurrency or debit cards or anything else. i think we need to make sure that whatever is out there, that everyone is brought along and everyone is included. one of my colleagues said we are all inflamed. some of us are not. i am not. i still have a checkbook and i keep and maintain it. i have a debit card that i was issued by my bank that i almost never used. we have to keep the options. wendy you see -- i find five years a long time to develop this. i'm not sure that china or took -- the bahamas took that long.

how long will it really take and how will we balance and make sure we have the different options for people? >> the truth is, i don't know what the number of years is. it depends on where we are in that decision process. >> where are we in the decision process? i'm a little frustrated. i'm here to the end and i've listened to all of this. well we had the fed chairman here, he pointed the finger and said that he was waiting for the treasury secretary to say something. then she came in and said that we are waiting for the working group. the working group said we are waiting for congress. who is going to decide and how long is going to take? we don't want to have to have you back here and say we are having to catch up. where are we on this and tell us

what the roadmap is. >> put out a discussion paper, but of course congress has a rolled up light -- a very important role to play. we would like in making that decision clear support from both the executive branch and congress. that is really all of you. in terms of other countries that have built it probably took china about six years to go from there decision to a pilot. what i have said i think is important is that while the public discussion on education is important and needed to take the amount of time that is appropriate, we can be doing some things at the federal reserve and that's what i'm hoping i can and my colleagues

can move around. if you were in congress to make that decision, we would be further along in that process so we wouldn't be starting from the first day, but we would know a lot about those policy design questions and technology built questions. that's the piece. >> you keep talking about stakeholders. can you define what that means? what consumer group is at the table? what minority groups, women's groups, what group representing rural america, what groups representing people who have access to cash but don't even depend on checkbooks either, they just go paycheck-to-paycheck and i deplore payday lenders. who was at the table because if we aren't at the table, one day we will be part of the results. >> absolutely.

this is a long process because we have a very rich set of stakeholders. we got comments, that's our first step is soliciting comments and consumer groups didn't solicit important comments. payment companies, tech companies, banks. we got a rich set of comments and now we are systematically going through to make sure we do reach out securely to the under banked, to rural areas. to those who would not otherwise -- >> i want to know who was at the table at consumer groups? is it consumer federation of america or the credit banks or community banks at the table? i'm struggling with trying to find out where we are in this process and i was hopeful that we would get some answers today. i yield back.

>> i'm happy to go through, we talked to the national consumer -- >> the gentleman from michigan is now recognized for five minutes. >> thank you. i want to follow up on a couple of my colleagues on the other side of the aisle. the view that digital currency are quite clear. i'm sure you've had a chance to review the letter that republicans on the committee sent. the crux of the question that mr. heinz was referring to is whether or not the alps tickles in our payment system -- the obstacles in our payment system could be addressed by a centralized israel currency. -- centralized digital currency.

i'm curious if you believe that is the case or not. >> the issue that the digital currency is able to address is having the full faith and currency. we had that in the physical space but not in the digital space. the financial system is moving extraordinarily rapidly to digital -- a primarily digital system. the question is that consumers households have direct access to state central bank today but payments are moving digital so the question is in the future do we want households to continue to have direct access to safe central bank money? also in the future, if stable

coins become the per dominant mechanism for digital representation of the dollar, what kinds of instability and fragmentation that might lead to. if stable coins are the only jewel representation of the dollar, is that potentially handicap us in the international environment? >> i'm getting fed speak. and a little filibustered on that. is that yes, you agree with that? now i can't hear. >> i think the right way to think about this is the future state of the payment system not what the payment system looks like today. it's still evolving rapidly. >> i look forward to the answers

from chair powell in response to our letter and i assume you will have involvement on that. i will move onto an additional question. i know this was something that has been in the mind of a number of colleagues. i'm curious why you think well-regulated stable coin will reduce the deposit base even more than a cbdc and given and intermediated cd bc, could that erode like the digital yuan? i don't have any way of knowing what regulates stable coins how much that might influence the deposit base relative to additional dollar.

i can't -- >> i want to get to my final question. february when we had the treasury undersecretary to testify on the presidential working group on financial market stable coin reporting, i asked her about agency coordination and about a month or so before the release of the report, the sec chairman stated that stable coins may have attributes of investment contracts, have some attributes like banking products, but the banks don't have the full gamut of what they need and how we work with congress to sort through that. since then, the sec has continued to offer contradictory statements offering little or no clarity on the issue. we've talked about how cbdc would be in conflict to stable

coins. how is the federal reserve coordinating with the sec on that issue? >> i see potential digital dollar issued by the central bank as complementary to private-sector innovation and to stable coins as coexisting with central bank with commercial bank money and stable coins. potentially -- private-sector innovation. of course we collaborate closely with the fdc. >> the gentleman from massachusetts who is also the vice chair of the full committee is now recognized for five minutes. >> thank you. i appreciate your time today. when you get to me, you are almost done.

over the course of this session, you have cleared up that you agree that you require congressional authorization to issue a cbdc. you had me nervous at the top of the hearing, but i strongly believe that you would need congressional authorization to issue a cbdc and that's important because there's a lot of skepticism that i hear and i share about the utility of a cbdc because it's a solution in search of a problem. because of the cybersecurity of this. because of its potential to infringe on americans privacy and because anytime you have programmable currency in the hands of centralized power, you risk the fact that it can be politicized easily. that would be hugely detrimental to the u.s. dollar being the world reserve currency. i strongly support your pursuit of research and development on a cbdc because a bigot gives us

understanding in negotiation for international protocols. maybe r&d is good but i'm not sure it should go onto the product stage. i want to continue on the line of questioning about fragmentation. you have offered it as one of the potential reasons for cbdc, is the only way you got the full faith and credit behind stable coin. i don't really understand that because a well audited and transparent stable coin regime really does the fact out have the full faith and credit of the u.s. dollar hind. one step removed. am i missing something? >> i think it's quite different to issue the digital asset as opposed to additional -- digital asset that has reserves behind it.

>> for purpose of the use in the market, why is that different? what is the missing link? >> the missing link is that you would have one tokenized asset that would be seen as having the full faith and credit of the u.s. government behind it because the u.s. government issued it. >> where going in circles because it is backed by u.s. dollar denominated currency that gives it full faith and credit. the market can price whether they think the liquidity is appropriate. whether it's 90 day securities or 180 day. x that may be right, but currently in the case of money market funds, that ability

hasn't been foolproof. we have seen runs on money market funds repeatedly. it is different to have a stable coin band to have a currency issued to the central bank. there's a number of protections that you can layer on. the more you layer on those protections, the more that private-sector asset may be less able to be used in certain ways. there is a trade-off. >> you have been promoting this idea of a cbdc also as a solution to fragmentation and even undergirding public-private coexistence. i am unclear with your answers

as to how it would help fragmentation to add a cbdc into the mix. what is the technical process by which you are improving interoperability in some way? >> it is creating one asset that every other stable coin can be seamlessly transferred into and out of. >> you can do that without a cbdc. >> not unless they are interoperable which requires standard-setting and some kind of central agreement around drop ability. >> we can focus on standard-setting without a cbdc. >> i think the question is whether you want that to be regulatory regime. >> thank you. i would like to thank the vice

chair for hurt testimony today. all legislators will have five days with which to submit additional written questions for the vice chair which will be forwarded for her response. vice chair, i asked that you please respond as promptly as you are able. without objection, all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. with that, this hearing is adjourned.

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