The president of the New York Fed has urged his colleagues to get ready for the approaching digital payment revolution.
On Wednesday, John Williams, president, and CEO of the Federal Reserve Bank of New York warned central bank officials, academics, and financial sector experts from around the world to prepare for a fundamental revolution in money and payments. The New York Fed and Columbia University co-hosted an invitation-only workshop on monetary policy implementation, and Williams gave the opening comments. With a single remark, the central banker rejected most of the digital asset market, stating that not all cryptocurrencies are backed by non-crypto assets. He went on to say that central bank digital currencies (CBDCs) and stablecoins backed by secure, liquid assets have the potential to be innovative.
Williams did not go into detail on the potential impact of digital currency in the future. Rather, he put the anticipated changes in context by pointing to the implications of the 2014 implementation of overnight reverse repurchase (ON RRP) agreements. The Fed’s balance sheet structure has been drastically transformed as a result of the $2 trillion in ON RRP agreements that have been maintained. An ON RRP is an agreement between a Federal Reserve bank and an eligible financial institution to sell an asset one day and purchase it back the next day in order to keep the federal fund rate within a predetermined range. One of the potential consequences of the adoption of a CBDC is the destabilization of interest rates.
Williams stressed that the central bank’s job remained unchanged despite technological advancements. The adoption of a U.S. CBDC has sparked a lot of debate and debate inside the administration. Before releasing one, the Fed has emphasized that it would like to have a congressional mandate.
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