Michelle Neal: Advances in digital currency experimentation Remarks by Ms Michelle Neal, Executive Vice President and Head of Markets of the Federal Reserve Bank of New York, at the Singapore FinTech Festival 2022, Singapore, 4 November 2022. ***  As prepared for delivery Good afternoon. It is a pleasure to be here with you at the Singapore Fintech Festival. It is exciting to be a part of this gathering of industry professionals, policy leaders, and investors to discuss key developments in the fintech industry. Digital innovation has the potential to benefit the financial system writ large by reducing transaction costs, increasing competition, and broadening access to a wider range of participants. However, harnessing the full potential of financial innovation and related technologies – especially regarding cross-border settlements and payments – will require collaboration across a range of international partners. In my remarks today I will discuss the landscape of digital assets and some of the ways that the Federal Reserve System is engaging in research and experimentation that support ongoing innovation. As always, the views I express today are my own, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System. Digital Assets and the Federal Reserve We are all experiencing the incredible pace of growth and change within the digital asset domain, which encompasses a range of opportunities and risks.
A CBDC would need to protect against cyber and operational risks, safeguard the privacy of sensitive data, and minimize risks of illicit financial transactions. Additionally, one of the most important aspects in our deliberations is that any form of a CBDC in the future would need to be intermediated. This means that the private sector would need to act as intermediaries in that system, and a direct account approach would not be contemplated. While the Federal Reserve has made no decision on whether or how to issue a CBDC, we are actively conducting technical investigations into both retail and wholesale CBDC design. Project Hamilton, which is a partnership between the Federal Reserve Bank of Boston and MIT, has experimented with potential approaches to a digital dollar, with work focused on retail uses and payment channels. In the use case they explored, the Hamilton team was able to demonstrate the potential for usage at scale, which would be a key design element of a retail CBDC. 6 As a complement, and in line with the New York Fed's unique role in the Federal Reserve System with wholesale payments in both domestic payments and foreign exchange, the New York Innovation Center is researching technical aspects related to wholesale CBDCs. In addition to CBDC, the broader digital assets landscape, which includes stablecoins – cryptoassets that are backed by assets such as U.S. Treasury securities to stabilize their value – and unbacked cryptoassets, has grown significantly in recent years, and continues to evolve quickly.