PALO ALTO, Calif. (Reuters) - The Federal Reserve is looking at a broad variety of issues around digital payments and currencies, including policy, style and legal considerations around potentially releasing its own digital currency, Guv Lael Brainard said on Wednesday. Brainard's remarks suggest more openness to the possibility of a Fed-issued digital coin than in the past." By changing payments, digitalization has the prospective to deliver higher value and convenience at lower expense," Brainard said at a conference on payments at the Stanford Graduate School of Service.
Central banks worldwide are debating how to handle digital financing technology and the dispersed ledger systems used by bitcoin, which promises near-instantaneous payment at potentially low cost. The Fed is developing its own day-and-night real-time payments and settlement service and is presently examining 200 remark letters submitted late last year about the proposed service's style and scope, Brainard said.
Less than two years ago Brainard informed a conference in San Francisco that there is "no compelling demonstrated need" for such a coin. But that was before the scope of Facebook's digital currency aspirations were extensively understood. Fed authorities, including Brainard, have raised concerns about consumer securities and information and privacy risks that might be postured by a currency that might enter into usage by the third of the world's population that have Facebook accounts.
" We are working together with other main banks as we advance our understanding of reserve bank digital currencies," she said. With more countries looking into issuing their own digital currencies, Brainard stated, that includes to check here "a set of factors to likewise be ensuring that we are that frontier of both research and policy advancement." In the United States, Brainard said, concerns that need study consist of whether a digital currency would make the payments system much safer or easier, and whether it could present financial stability risks, including the possibility of bank runs if money can be turned "with a single swipe" into the reserve bank's digital currency.
To counter the monetary damage from America's unprecedented nationwide lockdown, the Federal Reserve has taken unprecedented actions, including flooding the economy with dollars and investing straight in the economy. The majority of these moves received grudging approval even from lots of Fed skeptics, as they saw this stimulus as needed and something just the Fed might do.
My new CEI report, "Government-Run Payment Systems Are Hazardous at Any Speed: The Case Against Fedcoin and FedNow," details the dangers of the Fed's existing plans for its FedNow real-time payment system, and propositions for main bank-issued cryptocurrency that have been dubbed Fedcoin or the "digital dollar." In my report, Click here for more I discuss issues about privacy, data security, currency control, and crowding out private-sector competition and innovation.
Advocates of FedNow and Fedcoin state the federal government needs to create a system for payments to deposit quickly, rather than encourage such systems in the private sector by lifting regulatory barriers. However as noted in the paper, the personal sector is supplying a relatively limitless supply of payment technologies and digital currencies to fix the problemto the level it is a problemof the time space between when a payment is sent out and when it is received in a checking account.
And the examples of private-sector development in this area are lots of. The Clearing House, a bank-held cooperative that has been routing interbank payments in various forms for more than 150 years, has actually been clearing real-time payments because 2017. By the end of 2018 it was covering half of the deposit base in the U.S.