Fed's Waller sees stablecoins, AI working with traditional payment systems

 The Federal Reserve is conducting technical research in such areas as tokenization, smart contracts, and artificial intelligence in payments, Fed Governor Christopher Waller said on Wednesday.

In a speech at the Wyoming Blockchain Symposium, he discussed the development of stablecoin uses. Stablecoins, which are pegged to an asset like fiat currency, were originally used to facilitate crypto trading. But the properties of stablecoins — 24/7 availability, fast transferability, and their freely circulating nature — could be attractive for other uses, he said.

Such an asset could provide a means to access and hold U.S. dollars, especially in countries with high inflation or without easy or affordable access to dollar cashing or banking services, he said. "In fact, I believe that stablecoins have the potential to maintain and extend the role of the dollar internationally. Stablecoins also have the potential to improve retail and cross-border payments."

While some have feared that crypto and blockchain technology will make traditional payment rails obsolete, the new payment technology may be working along with traditional payments.  "For example, many stablecoin arrangements use legacy payment services to fund and redeem stablecoin balances," Waller said.

He also highlighted that "AI is not serving as payments infrastructure, but as an enabling technology that could bring considerable benefits to both private and public sector-operated payment services." For example, AI is being used to improve fraud detection and compliance.  And with agentic AI, which executes multistep processes autonomously, "payments innovators in the private sector are once again channeling the promise of this technology and rapidly building out various use cases," Waller said.

He looks forward to working with private sector innovators to further advance payment systems.

"It is my belief that the Federal Reserve could benefit from further engagement with innovators in industry, particularly as there is increased convergence between the traditional financial sector and the digital asset ecosystem," Waller said. "We are working on ways to further that engagement, so stay tuned."

https://www.msn.com/en-us/money/markets/fed-s-waller-sees-stablecoins-ai-working-with-traditional-payment-systems/ar-AA1KSJMv