Digital Assets and the Future of Finance: Examining the Benefits and Risks of a... (EventID=114689)

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Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, May 26, 2022, at 12:00 p.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Digital Assets and the Future of Finance: Examining the Benefits and Risks of a U.S. Central Bank Digital Currency." - - - - - - - - Witness for this one-panel hearing will be: • Dr. Lael Brainard, Vice Chair of the Board of Governors of the Federal Reserve System Introduction With the rapid growth in digital assets, policymakers, central banks, and the private sector are examining the potential implications of creating and using central bank digital currencies (CBDCs). While the definition of a CBDC varies, the Board of Governors of the Federal Reserve System (the Federal Reserve) defines a CBDC as a “digital liability of a central bank that is widely available to the general public.” Unlike other forms of digital money commonly used via payment apps and bank accounts, which are a commercial bank's liability, a CBDC would be a liability of the Federal Reserve. The House Committee on Financial Services has held a series of bipartisan hearings at the full Committee level on digital assets, including a hearing with CEOs of major companies developing cryptocurrencies or otherwise operating in the cryptocurrency marketplace and a hearing with the Treasury Department regarding the findings of the “Report on Stablecoins” by the President’s Working Group on Financial Markets (PWG). The Committee’s task forces and subcommittees have held additional digital assets-related hearings this Congress, examining such topics as investor protection concerns with cryptocurrency, implications of digital assets for consumer privacy and financial inclusion, the promises and perils of CBDCs, the risk of digital assets offering new avenues for sanctions evasion and other financial crimes, and the legal and regulatory framework governing digital wallets. This hearing will focus on research on CBDCs published by the Federal Reserve, the ongoing developments of foreign CBDCs, the White House Executive Order on Digital Assets, and other recent activity related to CBDCs. While definitions of a CBDC can vary, understanding what distinguishes cryptocurrency from fiat government-issued currency is fundamental. Fiat currency is money issued exclusively by a nation-state (usually through its central bank), is a liability of the issuing sovereign government, and derives its value through the public’s trust in the issuer. Unlike other cryptocurrencies, which can be used without central financial intermediaries, CBDCs are regulated by the monetary authorities of a nation, supported by the reserve assets of the country, and pegged to the value of that country’s fiat currency. Stablecoins are a subset of cryptocurrencies that usually also peg their value to a reserve asset such as a fiat currency, but there are currently no regulatory requirements to ensure that the value is always matched with the reserve asset. CBDCs may also use permissioned and private blockchains, while cryptocurrencies often use permission less and public blockchains. Some digital assets stakeholders have argued that CBDCs may challenge the need for stablecoins and may address long-term goals such as payment systems efficiency and financial inclusion that the digital private sector may not be prioritizing. However, at a January Senate Banking Committee hearing, Chair Powell remarked that a Federal Reserve CBDC would not eliminate the need for stablecoins.... Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=409382