Federal Reserve Governor's View on Payment Sector Innovations

By Michael S. Derby

NEW YORK (Reuters) – Federal Reserve Governor Christopher Waller emphasized on Tuesday the importance of the private sector leading innovations in the payment sector.

> “I hold the view that it is generally the private sector that can most reliably and efficiently provide goods and services to the economy. And I apply this view to the payments ecosystem,” Waller stated during a speech at The Clearing House Annual Conference 2024 in New York.

Waller questioned, “What is the fundamental market inefficiency that would be solved by government intervention and can only be solved by government intervention?” He concluded that if no satisfactory answer exists, government should refrain from intervening in private markets.

In his prepared remarks, Waller did not address monetary policy or the economic outlook but focused on the Fed's role in the payment system. He indicated that the Fed “stands ready” to support the evolution of the payment system primarily by providing core clearing and settlement infrastructure, enabling private sector innovation.

He referenced the FedNow system, emphasizing its role in real-time payments and noted the importance of helping link financial institutions within a “decentralized and diverse” banking system.

Waller also expressed ongoing skepticism regarding a Federal Reserve digital dollar or CBDC, stating, “What market failure or inefficiency demands this specific intervention? In more than three years, I have yet to hear a satisfactory answer as applied to CBDC.”