To that end, the central bank will be more active in studying those advancements. Fed Governor Christopher Waller said Tuesday (Oct. 21).
“The revolution transforming payments is demanding change everywhere,” Waller said in a speech for the Fed’s payments innovation conference in Washington.
“I am here to say that the Federal Reserve intends to be an active part of that revolution,” added Waller, whose comments were reported by Bloomberg News.
He stressed that the agency has a role to play in determining how to best align these innovations and the traditional financial ecosystem.
Waller also said he has asked the Fed’s staff to explore the idea of a “payment account.” One potential prototype for this would be a “skinny” master account. This account would offer access to the Fed’s payment rails.
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The agency wants to better understand how to mesh traditional and decentralized finance. Additionally, they want to explore emerging stablecoin use cases and the tokenization of financial products and services, the report added.
PYMNTS wrote last month about the way tokenization has moved from being a “niche concept to a strategic imperative across financial services. It increasingly underpins payment security and the trading of real-world assets.”
Tokenization offers benefits, the report said, such as security and fraud prevention. Network tokenization masks sensitive data. It lowers the risk of fraud while increasing transaction approval rates.
It also offers efficiency and programmability, as asset tokenization allows for instant settlement, automated compliance, 24/7 trading and fractional ownership. At the same time, there are challenges, such as regulatory and legal ambiguity, that report added.
“United States regulators like the Securities and Exchange Commission have not yet formalized frameworks for tokenized securities, although some officials say they are ‘willing to work with’ different approaches,” PYMNTS wrote.
In other Federal Reserve news, PYMNTS wrote last week that the agency plans to close the gap between business hours and real-time money movement, though that effort might take some time to accomplish.
The Fed hopes to expand the Fedwire Funds Service and the National Settlement Service (NSS) to operate 22 hours per day, six days a week, running Sunday through Friday and including weekday holidays.
The expansion — known in-house as “22×6” — is expected to begin in 2028 or 2029, allowing financial institutions and processors time to adapt systems and liquidity management practices.
Fedwire is the Federal Reserve’s large-value real-time gross settlement rail, used by banks, credit unions and other depository institutions that hold reserve accounts with the Fed.