At the Philadelphia Fed FinTech event held on September 8, the Vice Chairman of the Federal Reserve (Fed) discussed the central bank's role in financial innovation, focusing on research and oversight. He emphasized the Fed's commitment to conducting comprehensive research in areas related to central bank digital currencies (CBDCs) and other innovations, which could potentially serve as the backbone for CBDC payment systems or enhance existing payment systems.
The Vice Chairman highlighted the importance of system architecture for recording transactions and ownership on ledgers and tokenized models. The Fed's recent publication on wholesale CBDCs also emphasized that the technology associated with tokenized platforms aligns with existing central bank currencies as settlement assets. This research and development are part of the Fed's broader efforts to stay at the forefront of financial innovation.
Additionally, the Vice Chairman mentioned the Fed's recent unveiling of a regulatory plan for novel activities related to stablecoins. This plan includes a dedicated regulatory team that can provide feedback to federally regulated banks seeking to engage in activities involving stablecoins. Obtaining a "written regulatory no objection" is a key part of this process and aligns with policies outlined by the Office of the Comptroller of the Currency (OCC).
The Vice Chairman emphasized the importance of strong federal regulation for stablecoins, as they often rely on the trust associated with the central bank. He expressed appreciation for legislative efforts aimed at ensuring that stablecoins, especially those not subject to federal regulation, do not pose significant risks to financial stability, monetary policy, or the US payments system.
Finally, the Vice Chairman touched on the Fed's initiative to provide 24-hour instant payment services through the FedNow service, which was launched in July. While current usage volumes are relatively low, the service is now available to various types of financial institutions, including large banks, regional banks, community banks, and credit unions, with the onus on these institutions to offer this service more widely.
