Randal Quarles, vice chairman of the oversight of the Federal Reserve Board of Governors, said he believes that both dollar-pegged stablecoins and digital currencies issued by overseas central banks could be the main reason for US dollar concerns.

In a statement prepared for the Utah Bankers Association’s annual meeting on Monday, Quarles said foreign currencies – whether fiat or digital – were unlikely to question the US dollar’s role in the global economy. He cited the size of the US economy, trade relations with other countries and “reliable US monetary policy” as reasons why he believes that even a digital currency issued abroad would also be less risky.

“It is inevitable that as the world economy and financial system evolves, some foreign currencies (including some foreign CBDCs) will be used more in international transactions than in international transactions,” Quarles said. “However, it seems unlikely that the dollar’s position as a global reserve currency or its role as the dominant currency in international financial transactions will be threatened by a foreign CBDC.”

Quarles’ remarks on stablecoins pegged to the US dollar don’t seem urgent either. While the Fed vice chairman said there was “a legitimate and strong legal interest in how stablecoins are built and managed,” a US dollar stablecoin can support its fiat counterpart through payments. Faster, cheaper cross-border payments.

Quarles said concerns about stablecoins – especially holders who exchange large numbers of coins at once – are “resolvable.” Bitcoin (BTC), which he describes as a “high risk and speculative investment rather than a revolutionary means of payment,” is also unlikely to influence the role of the US dollar as crypto-assets are not yet widely accepted means of payment.

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However, instead of promoting a Federal Reserve-issued CBDC, Quarles implied that a federally issued digital currency would deter and potentially limit innovation from the private sector in order to regulate the availability of credit and many commercial banking services. While he didn’t rule out the US government’s eventual release of a CBDC, he added that any introduction should be prepared to prevent illegal activity and justify the potential cost of expanding the Federal Reserve.

“The potential benefits of Federal Reserve CBDCs are unclear […] I believe that developing a CBDC can involve significant risks. “

In May, Federal Reserve Chairman Jerome Powell said the government agency would release a discussion paper this summer to investigate the implementation of the CBDC. Powell has spoken many times about the possibility of the US government issuing a decentralized CBDC, saying that he believes it is more important to “do the right thing rather than do it first.”