WASHINGTON, Feb. 5 (Xinhua) -- A senior U.S. Federal Reserve (Fed) official said Wednesday that digital transformation of payments can bring new challenges for regulators, thus the public sector should work actively to update its oversight system and regulatory guardrails.
"By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost. But there are risks," Lael Brainard, a member of the Board of Governors of the Fed System, said during a public event in the state of California.
Some of the "new players," including technology firms, which are outside the financial system's "regulatory guardrails," could pose challenges in areas such as illicit finance, privacy, financial stability and monetary policy transmission, by creating new currencies and payment network, said Brainard.
Last year, U.S. social media giant Facebook revealed a project to create a digital currency, commonly known as Libra. Although the currency and its payment network have yet materialized, regulators, including U.S. Congress and the Fed, have repeatedly voiced their concerns.
"Private digital-currency-based payment systems could magnify concerns surrounding illicit activity and consumer risk, while potentially creating challenges for the public sector's ability to safeguard financial stability and use monetary policy to buffer the economy," said the Fed official.
Facing the new challenges brought by digitalization of payments and currency, regulatory agencies should update their oversight framework, invest in real-time retail payments infrastructure, and look into the idea of central bank digital currencies, said Brainard.
"The public sector needs to engage actively with the private sector and the research community to consider whether new guardrails need to be established, whether existing regulatory perimeters need to be redrawn, and whether a central bank digital currency would deliver important benefits on net," he added.
"By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost. But there are risks," Lael Brainard, a member of the Board of Governors of the Fed System, said during a public event in the state of California.
Some of the "new players," including technology firms, which are outside the financial system's "regulatory guardrails," could pose challenges in areas such as illicit finance, privacy, financial stability and monetary policy transmission, by creating new currencies and payment network, said Brainard.
Last year, U.S. social media giant Facebook revealed a project to create a digital currency, commonly known as Libra. Although the currency and its payment network have yet materialized, regulators, including U.S. Congress and the Fed, have repeatedly voiced their concerns.
"Private digital-currency-based payment systems could magnify concerns surrounding illicit activity and consumer risk, while potentially creating challenges for the public sector's ability to safeguard financial stability and use monetary policy to buffer the economy," said the Fed official.
Facing the new challenges brought by digitalization of payments and currency, regulatory agencies should update their oversight framework, invest in real-time retail payments infrastructure, and look into the idea of central bank digital currencies, said Brainard.
"The public sector needs to engage actively with the private sector and the research community to consider whether new guardrails need to be established, whether existing regulatory perimeters need to be redrawn, and whether a central bank digital currency would deliver important benefits on net," he added.
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