- Cleveland Fed president announced that Fed is exploring CBDCs
- Fed is also exploring various DLT-based technologies and platforms
- For time being, Fed’s focus is on the functioning of payment system
During the session of the 20th Anniversary Chicago Payments Symposium, Cleveland president of the Federal Reserve Bank, Loretta Mester, revealed that they have ongoing research in potential CBDC. Mester said that such research by the Fed of digital currency was ongoing since before the coronavirus outbreak.
She stated that on September 23rd in her keynote and pointed out that the Board of Governors has been examining in its technology lab, numerous DLT-based platforms to discern their possible advantages and drawbacks.
“Staff members from several Reserve Banks, including Cleveland Fed software developers, are contributing to this effort,” she said.
Fed exploring CBDC potential, adoption decision not made
Mester also said that explorations like this one are an outstanding model in determining the benefits but also the costs of “a central bank digital currency.” She added that these estimations and testing do not constitute the Federal Reserve’s decision to adopt CBDC.
“Issues raised by central bank digital currency-related to financial stability, market structure, security, privacy, and monetary policy all need to be better understood.”
On Wednesday, in comments made for a conference on payments, Cleveland Fed president did not comment on the U.S. financial policy or economic outlook. Instead, she insisted on improving the payment system and stated that it has to meet the growing needs of customers.
For Cleveland Fed president, payment system functionality is the priority
“We continue to make investments to modernize the technical platforms for traditional payment services, including the Fedwire Funds Service, FedACH, FedLine access channels, and currency-processing services.”
The new Fed plans could mean the expanding operating hours of the interbank clearing system, which services users that operate 24/7, around the year. The goal is to meet the interbank settlement needs, which have grown due to the increasing use of digital payment methods in recent months, according to Cleveland Fed’s internal statistics.
“We are enhancing services to facilitate cross-border payments, including expanding the reach of our FedGlobal ACH service and adopting the ISO 20022 global standard for several of our payment services.”
Mester announced they are exploring new technical procedures, like APIs. They want to know are new technical approaches suitable to make wider accessibility and efficiency of payment services. Following that course, the Fed is taking all necessary steps to improve its platform’s capabilities and security, pointed out Mester.
Mester’s note came fifteen days after the Central Bank of the Bahamas announced the launching of a CBDC in October.