JAKARTA – The world community must prepare for fundamental changes in money and payments. This was stated by John Williams, President and CEO of the Federal Reserve Bank of New York, to central bank officials, academia, and financial industry leaders from around the world on Wednesday, June 1.
Williams delivered the opening remarks at an invitation-only workshop on monetary policy implementation co-hosted by the New York Fed and Columbia University.
Central bankers ignore much of the digital asset space with the one-sentence observation that not all cryptocurrencies are backed by non-crypto assets. Yet central bank digital currencies (CBDCs) and stablecoins backed by safe liquid assets have the potential for innovation.
Williams did not elaborate on the possible future impact of the digital currency. Instead, he contextualizes the potential changes by showing the effects of the introduction of overnight repurchase agreements (ON RRP) in 2014. With the $2 trillion ON RRP agreements retained, they have dramatically changed the structure of the Fed's balance sheet.
ON RRP is an agreement that a Federal Reserve bank will sell a security to a qualified financial institution and buy it back the next day with the goal of keeping the federal funds rate within a target range. Destabilization of interest rates is one of the potential effects of the introduction of a CBDC.
Williams stressed that the central bank's role remains the same, regardless of technological changes. “As central bankers, it is very important for us to stay focused on carrying out our responsibilities, while staying abreast of developments in the world around us,” Williams said as quoted by Cointelegraph.
The introduction of the US CBDC has been the topic of much discussion and controversy within the government. The Fed has repeatedly stated that ideally, it would have a congressional mandate before issuing it.
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