WASHINGTON–A member of the Federal Reserve Board is urging caution around central banks in any country issuing digital currencies, although he believes there is a role for the regulators to play.
Fed Vice Chairman for Supervision Randal K. Quarles, who just joined the Fed in early November, called on both private issuers and central banks to “strike the right balance” when it comes improving technical networks for delivering digital currencies, while also not adversely affecting financial stability.
Speaking to the Financial Stability and Fintech Conference sponsored by the Federal Reserve Bank of Cleveland, the Office of Financial Research, and the University of Maryland’s Robert H. Smith School of Business, Quarles noted the development of digital currencies, and other technologies “will likely have a long-run effect on the technical networks and the business processes used in the payment system and the wider financial system.”
“Privately developed digital currencies as currently configured would raise concerns about the effect on financial stability if they take on more prominence in the payments and overall financial system,” Quarles said. “Central bank digital currencies are also not immune to a large range of risks and could even adversely affect financial stability.”
But regardless, added Quarles, there is opportunity for additional innovation in digital currencies.
“Working cooperatively, private-sector participants and central banks can incorporate innovation that may be able to strike the right balance of improving the technical networks without adversely generating financial stability concerns,” he told the meeting.
He further called for a prudent approach to such innovation.