![]() A predominance of private monies may introduce consumer protection and financial stability risks because of their potential volatility and the risk of run-like behavior. payment system in ways that impose burdens and raise costs for households and businesses. ![]() Given the network externalities associated with achieving scale in payments, there is a risk that the widespread use of private monies for consumer payments could fragment parts of the U.S. If widely adopted, stablecoins could serve as the basis of an alternative payments system oriented around new private forms of money. Depending on underlying arrangements, some may expose consumers and businesses to risk. Unlike central bank fiat currencies, stablecoins do not have legal tender status. Stablecoins vary widely in the assets they are linked to, the ability of users to redeem the stablecoin claims for the reference assets, whether they allow unhosted wallets, and the extent to which a central issuer is liable for making good on redemption rights. Sharpening the Focus on CBDCsįour developments-the growing role of digital private money, the migration to digital payments, plans for the use of foreign CBDCs in cross-border payments, and concerns about financial exclusion-are sharpening the focus on CBDCs.įirst, some technology platforms are developing stablecoins for use in payments networks. A stablecoin is a type of digital asset whose value is tied in some way to traditional stores of value, such as government-issued, or fiat, currencies or gold. ![]() As Chair Powell discussed last week, an important early step on public engagement is a plan to publish a discussion paper this summer to lay out the Federal Reserve Board's current thinking on digital payments, with a particular focus on the benefits and risks associated with CBDC in the U.S. payments system, and foreign authorities exploring the potential for central bank digital currencies (CBDCs) in cross-border payments, the Federal Reserve is stepping up its research and public engagement on CBDCs. With technology platforms introducing digital private money into the U.S. payments system, which is a vital infrastructure that touches everyone. The pandemic accelerated the migration to contactless transactions and highlighted the importance of access to safe, timely, and low-cost payments for all. ![]() Technology is driving dramatic change in the U.S. ![]()
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