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Credit to Author: Lucas Mearian| Date: Tue, 11 Feb 2020 03:00:00 -0800<\/strong><\/p>\n The Federal Reserve\u00a0is investigating<\/a> the potential of a central bank digital currency (CBDC) as the backbone for a new, secure real-time payments and settlements system.<\/p>\n The move toward a form of government-backed digital currency is being driven by Fintech firms and a banking industry already piloting or planning to pilot cash-backed digital tokens, according to Lael Brainard, a member of the\u00a0U.S. Federal Reserve’s\u00a0Board of Governors.<\/p>\n \u201cToday, it can take a few days to get access to your funds. A real-time retail payments infrastructure would ensure the funds are available immediately \u2013 to pay utility bills or split the rent with roommates, or for small business owners to pay their suppliers,\u201d said Brainard, who serves as chair of the committees overseeing Financial Stability and Payments, Clearing and Settlements.<\/p>\n Immediate access to funds could be especially important for households on fixed incomes or living paycheck-to-paycheck, when waiting for funds to be available to pay a bill can mean overdraft fees or late fees that compound. Similarly, for small businesses, immediate access to funds from a sale to pay for supplies can be a game-changer, Brainard added.<\/p>\n Along with benefits, however, a CBDC would also bring potential risk, said Brainard, who spoke last week at the Symposium on the Future of Payments<\/a> conference in Stanford, Calif.<\/p>\n \u201cThe prospect for rapid adoption of global stablecoin payment systems has intensified calls for central banks to issue digital currencies in order to maintain the sovereign currency as the anchor of the nation’s payment systems,\u201d Brainard said.<\/p>\n Last week\u2019s speech is a marked shift from one given in 2018<\/a>. At the time, Brainard said digital tokens for wholesale payments and some aspects of distributed ledger technology could strengthen traditional financial systems and markets, but warned there are \u201cserious technical and operational challenges that would need to be overcome.\u201d<\/p>\n BrandPost<\/span> Sponsored by HPE <\/span> <\/p>\n Defining the Next Chapter for the IT Industry: On-Premises IT-as-a-Service<\/a> <\/p>\n The \u201cAs a Service\u201d model delivers services, not products; flexibility, not rigidity; and costs that align to business outcomes.<\/p>\n For one, a CBDC might create \u201ca global target for cyberattacks or a ready means of money laundering,\u201d Brainard said during her 2018 speech at the \u201cDecoding Digital Currency Conference\u201d in San Francisco. \u201cEven though central bank digital currencies may at first glance appear to address a number of challenges associated with the current crop of cryptocurrencies, this appeal may not withstand closer scrutiny.\u201d<\/p>\n One reason for the change of heart from two years ago may be that since that time private efforts to create stablecoins have accelerated, including\u00a0Facebook\u2019s Libra<\/a> and JP Morgan\u2019s JPM Coin<\/a>.<\/p>\n Brainard expressed concern that while payments have traditionally been a service provided by \u201ctrusted intermediaries such as banks,\u201d fintech firms creating cryotpcurrencies are not under the Fed\u2019s jurisdiction \u2013 or its regulatory oversight. \u201cBanks offer important consumer protections,\u201d she said.<\/p>\n \u201cBecause Facebook has an active user network of one-third of the global population, the company’s Libra global stablecoin project has imparted urgency to the debate over what form money can take, who or what can issue it, and how payments can be recorded and settled,\u201d Brainard said in her latest remarks. \u201cAny stablecoin project with global scale and scope faces a core set of legal and regulatory challenges.\u201d<\/p>\n In China, Brainard noted, the majority of consumers and businesses participate in two mobile payment networks, Alipay and WeChat Pay, which by some accounts handled more than $37 trillion in mobile payments in 2018.<\/p>\n \u201cBuilding on the tremendous reach of its mobile payments platforms, China is reported to be moving ahead rapidly on plans to issue a digital currency,\u201d Brainard said.<\/p>\n Mike Poutre, CEO of venture firm \u200bTerraform Capital<\/a>, said, \u201cZuckerberg\u2019s Libra offering was a shot across the bow, and an olive branch, to governments and big businesses around the world.<\/p>\n \u201cThe message is you will never again have the same level of control over your currencies as you did prior to 2009, but if you act quickly and intelligently, you can maintain a level of control and visibility,\u201d Poutre said via email.<\/p>\n Todd Kornfeld, attorney in the law firm of Pepper Hamilton LLP<\/a>\u00a0and part of its Blockchain Practice, said the Fed may indeed be looking at private-side token development and concluding there are advantages to creating a standardized CBDC with the right framework around.<\/p>\n For one, a CBDC would allow banks to tie funds to an owner in a way stored currency value today cannot, Kornfeld said.<\/p>\n By creating a digital coin tied to the U.S. dollar and its owner through cryptographic hash keys, consumers and businesses alike would be able to track a token they own on an immutable electronic ledger, and possibly even retrieve it if an error is made after a transfer. In turn, government agencies could trace tokens, and ensure banks are complying with know-your-customer and anti-money laundering laws.<\/p>\n \u201cIn the US\u2026, you have a bank account and so much money according to bank’s ledger. [You] can\u2019t say that\u2019s my dollar,\u201d Kornfeld said. \u201cI think maybe they\u2019re looking now and saying that we\u2019ve thought about it more and there are things we could do that may make sense and maybe we should formally tokenize U.S. currency. I think this is in the early stages.\u201d<\/p>\n More than 80% of central banks say they’re engaged in some type of central bank digital currency (CBDC) effort, according to Bank for International Settlements survey of 66 central banks<\/a>.<\/p>\n \u201cThe latest survey suggests there is greater openness to issuing a CBDC than a year ago, and a few central banks report that they are moving forward with issuing a CBDC,\u201d Brainard said.<\/p>\n In January, the former chair of the Commodity Futures Trading Commission (CFTC)\u00a0partnered with Accenture<\/a>\u00a0to create the non-profit Digital Dollar Project, which plans to explore the creation of a U.S.\u00a0Central Bank Digital Currency<\/a>\u00a0(CBDC).<\/p>\n To be certain, there are already fast digitized money transaction services. Any person-to-person payment service such as Venmo<\/a> or Zelle<\/a>\u00a0allows consumers to store value in an account and make a nearly instantaneous transfer to another account holder. Federal reserve banks are developing FedNow<\/a>, a real-time gross settlement service to allow consumers and businesses to send payments in real time.<\/p>\n \u201cIn some sense, you can look at the FedNow and the clearing houses with similar products and\u2026they\u2019re using similar techniques and apps to try to move the U.S. dollars around faster. The banks have been constrained because the existing bank-to-bank transfer system has been slow,\u201d Kornfeld said.<\/p>\n In her speech, Brainard admitted that, unlike many foreign central banks, the U.S. Federal Reserve doesn\u2019t have complete authority over payment systems, particularly in retail banking. Given the increase in the number of nonbank payment industry players, Brainard said it may be time to review the nation\u2019s oversight framework and consider giving the Fed explicit authority for general retail payments oversight, as other nations do.<\/p>\n \u201cSo let’s turn to our retail payments infrastructure, which touches every American. It is critical that consumers and businesses can achieve the same speed and efficiency using their trusted deposit account providers with the safety and security they have come to expect,\u201d Brainard said. \u201cTo make this possible, it is vital to invest in real-time retail payments infrastructure with national reach.\u201d<\/p>\n Heinrich Zetlmayer,\u00a0founder and general partner of Switzerland-based Blockchain Valley Ventures<\/a>, said a CBDC would bring a range of benefits \u2013 especially cost savings and efficiency gains, \u201cwhich are inherent to the blockchain technology innovation for the financial sector and consumers.\u201d<\/p>\n A blockchain-based CBDC would essentially removed charges and bottlenecks created through intermediaries who process payments and settle them.<\/p>\n \u201cIt could also stimulate significantly the trading of other digital currencies and digital assets,\u201d Zetlmayer said via email.<\/p>\n \u201cIn my view that does not diminish the prospects for Facebook’s Libra, but certainly smaller projects need to take the new CBDCs into account in the assessment of market potential of private stablecoins,\u201d Zetlmayer said.<\/p>\n Poute agreed, saying while Libra may never get off the ground, \u201cit set forth wheels in motion in countries around the world that will lead to Central Bank Digital Currencies.<\/p>\n \u201cThese \u2018next generation of fiat currencies\u2019 will eventually replace paper money around the world,\u201d Poutre said.<\/p>\n \u201cThe reality is that crypto currencies have highlighted a global systemic problem in banking: in a world that now operates on a 24\/7\/365 mindset, how can business stay current when they are forced to use an 8-hour banking day?\u201d Poute said. \u201cThe advent of Bitcoin as a de facto currency is forcing the global banking community to realize that they are still working on an infrastructure that is hundreds of years old – and outdated.\u201d<\/p>\n http:\/\/www.computerworld.com\/category\/security\/index.rss<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Credit to Author: Lucas Mearian| Date: Tue, 11 Feb 2020 03:00:00 -0800<\/strong><\/p>\n<\/p>\n