New York Fed President Williams: Be mindful of the risks that digital currencies pose to financial stability

The Paper's reporter Jiang Mengying

After the listing of the first Bitcoin futures ETF in the United States, Bitcoin once again hit a record high. How should central banks face the digital currency challenge?

On October 22, John C. Williams, president of the New York Fed, said at the third Bund Finance Summit that reducing potential payment costs, especially international payment costs, will be an area of opportunity.

"I haven't seen much innovation in the financial services industry for decades, but now financial innovation is on the rise, including digital currencies, cryptocurrencies, and so on." Williams pointed out that in the past, the payment system did not work very well, and many types of payment costs in the United States were high, especially international remittances, which were expensive and time-consuming, and now there is an opportunity to reduce potential payment costs, especially international payment costs. The world is paying attention, and it is clear that low-cost payments are good for improving financial inclusion.

But Williams also stressed that it is also necessary to ensure that the mistakes of past financial innovation are not made, especially to protect consumers and investors. Payment systems should serve the public, paying special attention to issues such as the security of payments and the cybersecurity of new technologies.

Williams said that from the perspective of financial stability, digital currencies may be somewhat similar to mutual funds and money market funds. These systems are inherently risky, but before risk is priced, there may be a run in some cases, which could affect the financial system. To ensure that as new technologies, especially digital currencies, begin to be used, it is necessary to take into account both the good aspects and the risks to consumers and investors, as well as the risks to financial stability.

"Many countries are paying close attention to central bank digital currencies to ensure that technology can be used well, solve the problems just mentioned, and can truly serve the public." We cannot draw conclusions in this regard, but can only say that the current situation is exciting. Many central banks are studying these issues carefully, considering how technology can help people while ensuring financial stability. Williams said.

Recently, the G7 finance minister issued a joint statement on the central bank's digital currency and digital payments, saying: "Innovation in digital currencies and payments can bring significant benefits, but it will also raise regulatory issues." Central bank digital currencies can serve as a complement to cash, as an anchor for liquidity, secure settlement assets and payment systems. Any central bank digital currency must support and not compromise the ability of central banks to fulfill their monetary and financial stability missions. We recognize the shared responsibility to minimize harmful spillovers to the international monetary and financial system from cross-border payments through central bank digital currencies. Central bank digital currencies must exist in an open, transparent and competitive environment that promotes the diversity of payment options. ”

On September 23, Beijing time, Fed Chairman Powell said in response to reporters' questions after the interest rate meeting that the Fed still has not made a decision on the issuance of central bank digital currency, and is evaluating whether to issue central bank digital currency, but will soon release a discussion paper on central bank digital currency.

Editor-in-Charge: Zheng Jingxin

Proofreader: Yan Zhang