Tokenization & Smart Contracts: Fed Governor Weighs Benefits and Risk
Federal Reserve Governor Christopher Waller acknowledged the potential of tokenization and smart contracts to increase traditional financial transaction efficiency, while also highlighting the risks that come with these innovative technologies. During his speech at the Cryptocurrency and the Future of Global Finance event on April 20, Waller illustrated how blockchain technology and smart contracts allow private sector institutions to experiment with foreign-exchange trades, improving efficiencies and offering greater flexibility in settlement time. However, he recognized the potential risk posed by bugs, cyber threats, and settlement risks, while expressing optimism about the private sector’s innovations to enhance transaction processes. He also spoke about the potential role of tokenization and AI in banking and the economy without touching on monetary policy-related issues.