The US Federal Reserve should consider extending its regulatory oversight role to non-bank players in retail payments, says Governor Lael Brainard.
In remarks given in a speech at Stanford Business School, Brainard pointed out the Fed's supervisory authority only covered the nation's two large-value interbank payment network, but no retail payment system to date.
The Fed's powers are limited in areas where technology firms develop payments services connected to digital wallets rather than bank accounts and rely on digital currencies rather than sovereign currencies as the means of exchange.
"Given the growing role of nonbank technology players in payments, a review of the nation’s oversight framework for retail payment systems could be helpful to identify important gaps," she says. "A good place to start may be contrasting the US oversight framework for retail payment systems with other jurisdictions. Many foreign central banks, for example, have explicit authority for general retail payments oversight. Moreover, most jurisdictions require that payment systems obtain a license and/or registration before commencing operations."
The United States requires registration of a money transmitter at the federal level for purposes of Bank Secrecy Act/Anti-Money-Laundering compliance, but it does not require broader federal oversight of payment system operators.
Brainard concludes: "In the United States no less than in other major economies, the public sector needs to engage actively with the private sector and the research community to consider whether new guardrails need to be established, whether existing regulatory perimeters need to be redrawn, and whether a central bank digital currency would deliver important benefits on net."