Fed member Christopher Waller said Tuesday he believes the private sector should take the lead when it comes to innovations in the payments sector.
“I believe that it is the private sector that can generally provide goods and services to the economy more reliably and efficiently,” Waller added in remarks he made at the Clearing House’s 2024 annual conference in New York. “I apply this view to the payments system.”
“What is the fundamental market inefficiency that can be solved through government intervention and can only be solved through government intervention?” Waller asked, noting that “if there is no satisfactory answer, then I believe that the government should not interfere in private markets.” .
Waller did not comment on monetary policy and the economic outlook in his prepared remarks, which focused on the role the Fed plays in the payment system.
He said that the US central bank is “ready” to help the payment system develop “primarily through our operational role in the payment system, by providing the clearing and settlement infrastructure in which the private sector can innovate.”
Waller said this role aligns with what the central bank does with FedNow, the real-time payment system.
One of the key roles the Fed can play, he continued, is to strengthen private sector efforts to connect financial institutions into a “decentralized and diversified” banking system.
The Fed governor also continued to express doubts about the Fed’s digital dollar, or central bank digital currency. “What is it about the market failure or inefficiency that requires this specific intervention? In more than three years, I have yet to hear a satisfactory answer regarding a central bank digital currency,” he said.
Waller also said in his remarks that stablecoins are effectively “synthetic” dollars that can bring benefits to the financial system.
Waller emphasized that these assets “could have a lot of potential benefits” and “eliminate” inefficiency in the financial system. He added that legislation is necessary to deal with safety issues because these types of assets are at risk of collapse that could destabilize the financial system.
