NY Fed president urges colleagues to prepare for coming digital payment transformation

NY Fed president urges colleagues to prepare for coming digital payment transformation

John Williams, President and CEO of Federal Reserve Bank of New York told financial industry executives, academics, and central bank officials from all over the globe that Wednesday will bring about a fundamental shift in money and payment policy. Williams gave the opening remarks to an invitation-only workshop about monetary policy implementation, co-hosted jointly by Columbia University and the New York Fed.

With a one-sentence observation, the central banker dismissed a lot of the digital asset market with the single-sentence observation not all cryptocurrencies are backed up by non-crypto assets. He continued that central bank digital currencies (CBDCs), and stablecoins backed with safe, liquid assets have the potential to be innovative.

Related: The United States turns their attention to stabilization

Williams didn’t go into detail about the future potential impact of digital currency. Williams emphasized the potential changes in the context of ON RRP agreements, which were introduced in 2014. They have significantly altered the balance sheet structure by maintaining $2 trillion in ON RRP agreements.

An ON RRP agreement is where a Federal Reserve bank sells a security to a financial institution eligible and then buys it back the next morning for the purpose keeping the federal fund rates within a specified range. The introduction of a CBDC could lead to destabilizing interest rates.

Williams stressed that the central bank’s role remains the same regardless of technological advancements. He stated:

“As central bankers it is crucial that we keep our eyes on the future and remain in line with the world around.

There has been much debate and controversy about the introduction of a U.S. CBDC. In principle, the Fed would require a congressional mandate to issue a CBDC.

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