One could easily think that the Fed chair is stating the obvious, and we would not disagree, although we would also add that it was well known prior to the pandemic that improvements were needed in x-border payments. That’s why we have been seeing innovations in the space since 2016.
This piece is posted in the WSJ and provides a summary of Powell’s pre-recorded comments that took place at a BIS conference in Basel, Switzerland:
‘The coronavirus pandemic has underscored the need to improve systems for transferring money across international borders, Federal Reserve Chairman Jerome Powell said Thursday….“The Covid-19 pandemic has shined a light on the less efficient areas of our current payment system and accelerated the desire for improvement and digitalization,” Mr. Powell said in remarks prepared for delivery at a conference held by the Bank for International Settlements, a consortium of central banks.’
Followers of the space and certainly our members will be up-to-date on developments here, especially given our various postings and releases during the recent months. In the know readers may see this as a ‘day late and a dollar short’ type of recognition by the Fed chair, given that CBDC’s are only in the study stage here in the U.S. versus other more advanced recent developments.
However, speed to market may or may not have as much to do with success in the space versus getting it right, especially from the legal and regulatory perspective. The Fed seems content to study digital currencies (as part of BIS initiatives as well as separate efforts) and let the market develop in the private sector, although FedNow is slated for late 2023 release and there may be some cross-border payment implications following that, whether or not CBDCs are involved.
‘Mr. Powell didn’t comment on monetary policy or the outlook for the economy, a day after the central bank reaffirmed plans to maintain its bank’s easy-money policies until the recovery advances further….He said Thursday that the existing system for cross-border payments is safe and reliable. But he added that it suffers from outdated technology in some areas and inefficiencies that can make it difficult to comply with requirements to fight money laundering and terrorist financing.’
For those interested, full remarks can be found here at the BIS website.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group