FED – Federal Reserve Chair Jerome H. Powell outlines the Federal Reserve’s response to technological advances driving rapid change in the global payments landscape


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Technological advances are driving rapid change in the global payments landscape. The Federal Reserve is studying these developments & exploring ways that it might refine its role as a core payment services provider & as the issuing authority for U.S. currency.

“As the central bank of the United States, the Federal Reserve is charged with promoting monetary & financial stability & the safety & efficiency of the payment system,” FED Chair Jerome H. Powell said Thursday in a video message. “In pursuit of these core functions we have been carefully monitoring & adapting to the technological innovations now transforming the world of payments, finance, & banking.”

This technology also offers new possibilities to central banks—including the Fed. In particular, it enables the development & issuance of central bank digital currencies, or CBDCs. A CBDC is a new type of central bank liability issued in digital form. While various structures & technologies might be used, a CBDC could be designed for use by the general public.

As the Federal Reserve explores the potential benefits & risks of CBDCs, the key focus is on whether & how a CBDC could improve on an already safe, effective, dynamic, & efficient U.S. domestic payments system in its ability to serve the needs of households & businesses. “We think it is important that any potential CBDC could serve as a complement to, & not a replacement of, cash & current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, & privacy considerations & will require careful thought & analysis—including input from the public & elected officials.”

Powell announced that the Federal Reserve plans to publish this summer a discussion paper that will explore the implications of fast-evolving technology for digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency. The paper will complement Federal Reserve System research that is already underway.

The Federal Reserve System is focused on better understanding the full set of opportunities & risks associated with new digital payment mechanisms. More technically oriented projects, focused on specific tools & infrastructure, are underway at the Board & the Federal Reserve Bank of Boston. The Fed is also collaborating internationally in groups such as the Bank for International Settlements’ CBDC coalition.

A video message from Chair Powell on payment innovation can be viewed at: www.federalreserve.gov.

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Source: Federal Reserves

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