“Serious” central banks understand the implications of digital currency: US policymakers
New York Fed Chairman John Williams said on Wednesday that while the development of digital currency and payment technologies could change how the Federal Reserve conducts monetary policy and the structure of its balance sheet, the central bank will need to work to understand .
“Digital transformation can have implications for how we implement monetary policy, as well as our interactions with counterparties, on markets,” Williams said in the opening remarks of a research conference at Columbia University.
“The big question is what will the world of digital currencies like stablecoins and (central bank digital currencies) mean for monetary policy implementation. How will central banks anticipate and adapt?” Williams said.
The role of central banks “will always be to supply money and liquidity to bring stability to the economy and financial system,” he said. But “it is important that we understand how these changes can affect the economy and the financial system, as well as monetary policy implementation.”
The Fed is debating whether to create its own version of the digital currency, and President Joe Biden’s administration is having extensive discussions about the regulation of cryptocurrencies and related technologies such as stablecoins.
Even as the Fed creates a digital dollar, the growth of a network of private currencies, the increase in the size of stablecoin and crypto markets, and the expansion of private payment options could have a profound effect on banks and the legacy financial system. Depends on bank policy.
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