On November 30, 2017, Vice Chairman for Supervision of the US Federal Reserve Board Randal Quarles provided remarks at the 2017 Financial Stability and Fintech Conference regarding innovation in the payments system. Vice Chairman Quarles noted that technological innovation has greatly changed our day-to-day lives, including in the financial services industry, but cautioned that utility and innovation need to be weighed against the potential ramifications that innovation has on the safety and soundness of the financial system. He noted that this tension is not intrinsically negative, but that care should be taken to maintain stability and safety. Vice Chairman Quarles provided commentary on digital currencies, stating that it may be important to separate underlying technology, such as distributed ledger technology, from the overall concept of digital currency itself. He expressed concerns regarding the wide-spread use of digital currency in its current form, and further cautioned that central-bank-issued digital currency may not be a viable alternative, noting that the latter would require extensive review and consultation about legal and risk issues.
However, he noted that research into digital currency issues, including for use as a settlement asset for wholesale payment systems should continue. In closing, Vice Chairman Quarles noted that prudent innovation may be the best course of action to balance the need for innovation with the need for stability.
The transcript of Vice Chairman Quarles's remarks is available at:
https://www.federalreserve.gov/newsevents/speech/quarles20171130a.htm.
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