Central banks will always play a significant role in supplying money and liquidity to ensure the stability of the economy and the financial system.
On June 1, CEO of the Federal Reserve Bank of New York John Williams issued a statement to various bank officials and a number of financial industry leaders emphasizing that a significant change in money and payments is evident. The CEO gave the opening comments at the New York Fed and Columbia SIPA Monetary Policy Implementation Workshop.
The central bank acknowledged the rapid growth of digital currencies while rejecting most of the digital asset market and stating that not all cryptocurrencies are backed by non-crypto assets. The speech also indicated that stablecoins and central bank digital currencies (CBDC) are fully backed by safe and liquid assets, which paves the way for an innovative approach to storing money and operating payments.
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The evolution of digital payment and payment technology can lead to an important modification. “Digital transformation could have implications for markets and for our interactions with counterparties, as well as how we carry out monetary policy,” Williams added.
Williams also raised a question about stablecoins and how they would act in the implementation of monetary policy to regulate the size and growth rate of the money supply in the country’s economy. He wondered “how will central banks anticipate and adapt to the changing landscape brought on by the possibility of digital currencies?"
Finally, the CEO commented on the importance of the workshop by suggesting that it’s a perfect way to start acknowledging the challenges and possibilities that lie in the future. This will ensure that “we will be prepared for and successful in the future.”
In addition, central banks will always seek to supply liquidity and money to maintain stability in the financial system. However, it’s essential to comprehend how such changes might affect the economy. He stated:
“As central bankers, it's critical that we remain focused on carrying out our responsibilities, while keeping pace with the world around us.”
In other news, earlier this year, Mercado Bitcoin, a Latin American exchange, joined forces with the Stellar Development Foundation (SDF) to develop one of the nine projects selected for the LIFT Challenge Real Digital. The initiative seeks to investigate use cases for central bank digital currencies (CBDCs).
