Intermediaries continue to be at the centre, even as distribution becomes more decentralised with diverse players and new ways of connecting with customers. Stepping a layer down, let us now examine the underlying Infrastructure of financial services. Technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralised systems of today. Take for example, open crypto networks based on self-executing smart contracts and noncustodial financial services, where users maintain control over their assets at all times. By replacing intermediaries and central parties, these networks aim to reduce both the cost and risk of finance. By decentralising key aspects of financial infrastructure, such as access, data, and code, open crypto networks can also potentially enhance inclusion and innovation. When firms of all sizes, and even individuals, can directly access financial infrastructure, it could mean more competition and inclusion. When transaction data is available to all participants, and not confined within the intermediary responsible for the transaction as is the case today, it could mean more contestability and transparency. W hen code can run directly and publicly on these networks, unlike proprietary code that runs on private servers, it could mean more interoperability and innovation. We are certainly not at the point where these self-governing networks can meet the high standards of governance, security, resilience that we demand of critical infrastructure. Even so, central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure. These ideas could be particularly relevant to the development of CBDCs.

The institutional arrangements that seem most relevant to monetary policy credibility and competence involve the degree of independence afforded the central bank, the design of the mandate or objectives given the central bank, the regime or instruments adopted by the central bank to pursue that mandate, the structure of the decision making process, and the degree of communications and transparency. I want to talk about this broad complement of the institutional foundations of a credible central bank, and I’ll do so in part by talking about the history of the central bank of the United States. For reasons that are simple and compelling, independence is a critical part of the foundation for a credible central bank. Independence comes in many forms, and some of the most important dimensions of independence are hard to discern from the legal underpinnings or the formal structure of the institution. Central banks with many of the formal or legal attributes of independence can make bad policy choices. Central banks without formal independence can make good policy choices and achieve sustained improvements in macroeconomic outcomes. What does independence mean and how do we know it when we see it? Why is it important and how does it affect the quality of monetary policy choices and outcomes? In its most basic sense, independence is the freedom to pursue a defined monetary policy objective without consideration of political or private interests, and without fear of subordination to other economic policy objectives.