In prepared remarks for an occasion in Germany on Wednesday, Lael Brainard said more clarity is required about the basket of currencies underlying the stablecoin which its model remains unproven.
The risks “could be exacerbated by the shortage of clarity about the management of reserves and therefore the rights and responsibilities of varied market participants within the network,” she said.
The Libra Association has previously said the token would be backed by collateral consisting of the U.S. dollar, euro, yen, British pound and Singapore dollar, with USD taking over the most important proportion. The association is comprised of firms and other entities that put up the assets backing the coin.
The sheer size of Facebook’s reach has had U.S. and other global regulators worried about the impact of the project should it begin during a big way.
“What would set Facebook’s Libra apart, if it were to proceed, is that the combination of an active-user network representing quite a 3rd of the worldwide population with the issuance of a personal digital currency opaquely tied to a basket of sovereign currencies,” Brainard said.
If “requisite safeguards” aren’t in situ, global stablecoins pose a risk to consumers, she said. “It isn’t even clear what proportion price risk consumers will face since they are doing not appear to possess rights to the stablecoin’s underlying assets.”
She contrasted the nascent stablecoin scenario with the “strong safeguards” developed over decades that buyers now expect on their bank accounts and related payments.
“Given the stakes, any global payments network should be expected to satisfy a high threshold of legal and regulatory safeguards before launching operations.”
In October, Brainard made similar comments on Libra, saying the project could impact central banks’ balance sheets if it achieves scale.