John Williams, president of the Federal Reserve Bank of New York spoke to central bank officials and financial industry professionals urging them to prepare for a digital payment transformation.
The New York Fed and Columbia University co-hosted an invitation-only workshop on monetary policy implementation, and Williams gave the opening comments on digital payment and the future of money.
With a single sentence, the central banker dismissed much of the digital asset space, 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 effects 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 buy 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. He stated, “
“As central bankers, it’s critical that we remain focused on carrying out our responsibilities, while keeping pace with the world around us.”
The adoption of a U.S. CBDC has sparked a lot of debate and debate inside the government. Before releasing one, the Fed has emphasized that it would prefer to have a congressional mandate.
