In remarks celebrating European Central Bank executive board member Benoît Coeuré, Federal Reserve Governor Lael Brainard focused on the risks associated with digital currency and stablecoins. Brainard was part of a panel focused on future monetary policy challenges.
During his remarks, he cited a study that claimed one-quarter of all bitcoin users are engaged in some type of illegal activity. According to Brainard:
“Only a third of the most popular exchanges require ID verification and proof of address to make a deposit or withdrawal. This is troubling, since a number of studies conclude that cryptocurrencies support a significant amount of illicit activity. One study estimated that more than a quarter of bitcoin users and roughly half of bitcoin transactions, for example, are associated with illegal activity.”
He also noted that the study in question found that only one-third of popular cryptocurrency exchanges have adequate safeguards to ensure that AML, CTF, and KYC standards are met.
Brainard’s remarks also touched on stablecoins, noting their potential for putting consumers at risk. He suggested that U.S. and EU payment systems have proven to be safer options for those areas’ citizens thanks to strong regulatory requirements and protections that currencies like Libra might not provide.
He also highlighted the Federal Reserve’s current plans to improve U.S. payments with its FedNow system:
“Most immediately, the Federal Reserve is actively working to introduce a faster payment system for the United States, to improve the speed and lower the cost of consumer payments. In many countries, consumers are already able to make real-time payments at low cost. This summer, the Federal Reserve announced the first new payment service in more than 40 years—the FedNow Service—to provide a platform for consumers and businesses to send and receive payments immediately and securely 24 hours a day, 365 days a year.”