Fed Waller: Encryption technology is not scary and should work with the industry to promote payment innovation.

Author: Zhao Yuhe, Wall Street News

Before the Jackson Hole Global Central Bank Annual Meeting, the cryptocurrency community held a blockchain seminar in Jackson Hole, attended by senior officials from the Federal Reserve, SEC, and Trump's son. Christopher Waller, a Federal Reserve governor appointed by President Trump and one of the popular candidates for the next Federal Reserve Chair, spoke at the meeting on Wednesday, urging for the embrace of the "technology-driven revolution" happening in the fields of artificial intelligence and stablecoins, believing that it could drive the development of the U.S. economy.

Waller stated in his speech that digital asset innovation "is not to be feared," as the payment system is undergoing a "technology-driven revolution." The latest advancements in computing power, data processing, and distributed networks are giving rise to many innovative payment services.

"There is nothing to be afraid of when thinking about smart contracts, tokenization, or distributed ledgers."

"The technology we have today may be new, but using innovative technology to build new payment services is nothing new."

Support the Federal Reserve's collaboration with the industry in the payment field

Waller was appointed by Trump in 2020. He had previously stated that he supports the application of certain technologies in decentralized finance (DeFi), believing that it can complement traditional payment systems. For example, he mentioned that distributed ledger technology can record asset transfer processes more efficiently and quickly.

In his speech on Wednesday, Waller emphasized that the impact of DeFi in the payment sector, including its risk mitigation role, has the potential to yield positive outcomes under the premise of collaboration between the private sector and the Federal Reserve. He stated that both the public and private sectors can embrace innovation in their respective roles.

He stated that in recent years, some of the most groundbreaking innovations have been "stigmatized" because they are associated with digital assets.

"These are just technologies, why are they so bad? If these technologies can bring more practical and interesting applications, we should also study and adopt them."

Media analysis suggests that cryptocurrency companies are weighing a key strategic question: how much control they should have over the circulation mechanism of digital currencies, whether to build an entirely new system, rely on a shared system, or strike a balance between the two.

In this regard, Waller stated that the evolution of payment systems has always been driven by technological advancements, with most changes led by innovations from the private sector, while the key infrastructure is supported by the Federal Reserve—either as a system operator providing core infrastructure or by guiding the entire industry in establishing payment standards and other specific solutions.

"This complementary relationship has enabled a secure and efficient payment system in the United States, becoming a backbone of domestic and international business activities. Therefore, the Federal Reserve must continue to embrace technological advancements, promote service modernization, and consistently support innovation in the private sector."

The Federal Reserve is researching tokenization and AI technology in payments

The Federal Reserve launched the long-awaited payment network FedNow in 2023, allowing eligible banks with accounts at the Federal Reserve to execute instant fund transfers. Prior to this, the United States had lagged behind other countries to some extent in the promotion of real-time payments.

Waller stated that the Federal Reserve is exploring a new round of payment technology innovations, including tokenization, smart contracts, and the application of artificial intelligence in payments.

"As a central bank, we may never go down this path, but there is no reason not to explore and see what happens."

Waller said that as operators of payment systems, it is crucial to understand these trends, as it can help the Federal Reserve better support private enterprises that utilize the relevant infrastructure, as well as assess whether emerging technologies have the potential to improve the Federal Reserve's existing platforms and services.

"In fact, I believe the Federal Reserve should further strengthen its interaction with innovators in the industry, especially against the backdrop of the increasing integration of traditional finance and the digital asset ecosystem. We are exploring how to advance this work, so stay tuned."

The Wyoming Blockchain Summit is held three days before the global central bank annual meeting in Jackson Hole. Analysts say that this summit marks the climax of the "Summer of Stablecoins" as described by Goldman Sachs.

Waller is also the second senior official from the Federal Reserve this week to publicly praise the cryptocurrency industry. The day before Waller's speech, Federal Reserve Vice Chair for Supervision Michelle Bowman also stated at the summit that banks and regulators should treat the industry better and praised the development of tokenization.

In a previous article, it was stated that Bowman remarked in her speech on Tuesday that the banking industry and regulators must embrace the benefits brought by new technologies such as artificial intelligence and cryptocurrencies, or else their role in the economy may gradually diminish. She indicated that ideally, regulators should allow these new uses to "expand in a way that is beneficial to the banking system."