Earlier today, we published criteria for money market mutual funds to become eligible to participate in reverse repo operations, which was a first and important step in that direction. We are currently working with other types of firms to assess their potential participation in the program, as well. Our expectation is to have arrangements in place and to be ready to transact with some non-dealer firms by the end of the second quarter. This expansion of counterparties is important for boosting the capacity of the program. 4  BIS Review 39/2010  The bottom line is that the preparation of both facilities is advancing very effectively. Looking across the two programs, we will have established the capacity to drain a significant portion of excess reserves by the second half of the year. Of course, achieving this capacity does not say anything about how and when the FOMC will decide to actually drain reserves. The actual timing and size of draining operations, and their relation to changes in the interest rate paid on reserves, will depend on how market and economic conditions evolve. Chairman Bernanke discussed one possible sequence in his February 10 testimony. He suggested that operations to drain reserves could be run on a limited basis well ahead of policy tightening, in order to give market participants time to become familiar with them, and then could be scaled up to more significant volume as we approach the time for policy tightening.
Ensuring adequate provision of a means of payment that is credit-risk free and fully and efficiently available and accessible to any potential user group is extremely important. To date, cash has been the only asset that enjoys legal tender status and has played this role. Yet, the way cash is fathomed and embraced nowadays is heavily influenced by the increasing digitalisation of society, and by technological change more generally. For example, the behaviour, preferences and expectations of users are changing rapidly, as their experience with digital technologies grows. Novel payment alternatives, provided  1  either by private players (both traditional and non-traditional ones) or by public authorities in various jurisdictions, may also surface and/or expand, presenting greater appeal than traditional banknotes and coins. Moreover, new features of existing payment instruments or services, such as programmability, are now becoming possible thanks to emerging technologies. Therefore, besides ensuring the availability of cash, we also need to consider new ways of improving the efficiency of retail payments by leveraging digital technology more extensively. All of this could signal the need to broaden the approach and explore new opportunities, aiming to better address modern society’s unmet demands. In this process, the notion of a universally accessible CBDC stands out, that is, a new type of central bank digital liability that could be made widely available.