The governor of the Federal Reserve, Christopher J. Waller, inaugurated the Payments Innovation Conference this Tuesday, highlighting the central role of the private sector in the transformation of the financial system and revealing new ideas that the Fed is evaluating to promote innovation in payments.

Waller explained that there are two models of innovation: one driven by the private sector, which takes risks and leads the development of new technologies, and another in which the public sector acts as a facilitator, providing infrastructure that expands the reach of financial services.

“The role of public institutions should be limited, but enabling,” he stated, emphasizing that the security and stability of the payment system remain essential.

The official acknowledged that distributed ledger technologies (DLT) and crypto assets are no longer on the periphery but are integrated into the fabric of the financial system. In that context, he urged authorities to embrace private innovation without compromising the stability of the system.

A new category of accounts for the digital age

One of the most relevant announcements was the proposal to create a new category of “payment accounts”, or simplified payment accounts, also referred to as “skinny master accounts”.

These accounts would be available for legally eligible institutions that are engaged in payment innovation but do not require all the services of a traditional master account. They would allow direct access to the Federal Reserve's payment networks, without generating interest or allowing intraday overdrafts, and with balance limits to mitigate risks.

Moreover, Waller indicated that the Fed is conducting active research on tokenization, smart contracts, and artificial intelligence applications in payments, with the purpose of assessing improvements in its own infrastructure and strengthening dialogue with the private sector.

Digital assets and distributed networks are no longer on the periphery, but have woven themselves into the fabric of the financial system. Christopher J. Waller

The meeting brings together more than 100 innovators from the private sector, including banks, asset managers, technology companies, and native crypto fintechs, who will present their advancements in integrating traditional payment systems with blockchain and artificial intelligence tools.