New York Fed President urges banks to prepare for digital payments transformation

The president of the New York Fed urged banks to prepare for the coming fundamental transformation of digital payments and closely monitor the consequences of technological transformation.

Speaking at a seminar on monetary policy implementation, President of the Federal Reserve Bank of New York (FRB) John C. Williams (John C. Williams) drew the attention of colleagues that the banking industry needs to prepare in advance for fundamental changes related to the consequences of the use of crypto assets and the introduction of central bank digital currencies (CBDC).

“Thanks to technological transformation, the financial world is changing radically. This opens up opportunities to do many things faster and more efficiently. The explosion of digital currencies, including cryptocurrencies that are backed or not backed by safe and liquid assets, as well as CBDCs, could become a new way to store money and make payments. While innovation brings new opportunities, it also comes with risks that you need to be prepared for,” Williams said.

The head of the FRB called on colleagues to understand how these transformations can affect the economy and the financial system, as well as the implementation of monetary policy and the Central Bank’s balance sheets. In addition, he recommended that the banking industry carefully consider steps to properly regulate the circulation of digital currencies to protect the rights of consumers and investors, as well as ensure the stability and security of the entire financial system.

In February, analysts at the Federal Reserve Bank of New York published a report suggesting that the use of digital assets in the traditional banking system could lead to a shortage of safe and liquid assets.