, or dlt. bitcoin helped bring this technology to public attention. using blockchain technology — which employs a form of dlt — and an open architecture, bitcoin allows for the transfer of value ( bitcoins ) between participants connected to its ecosystem without reliance on banks or other trusted intermediaries. this feature has led some to predict that dlt will in the long run render parts of the banking and payments system obsolete, as the intermediation of funds through the banking system will become unnecessary. faced with these dramatic predictions, we have seen banks and market infrastructures collaborate with technology firms to explore the use and further development of dlt. in 2016, there was widespread experimentation. efforts by financial institutions often focused on evaluating the technology, identifying potential uses, and conducting proofs of concept. prominent examples included the use of distributed ledgers to store transactional data and records in tamper - proof ways, as well as the use of the technology as a primary means to hold and transfer money or assets. by the end of 2016, a few major u. s. clearing organizations had announced plans to use distributed ledger technology in limited ways. as we have followed developments over the past year, a few lessons have come into better focus. 6 first, in contrast to bitcoin ’ s open architecture, work by the financial industry has focused on the development of “ permissioned ” systems, which establish criteria to determine who is permitted access to particular systems, ledgers, functions, or information. in the near term, this approach seems more likely than fully open systems to provide the needed governance and management to address operational, security, and financial risks. indeed, access is typically permissioned in situations that require the protection of systems and information in the financial and other industries. even in permissioned systems, some key issues will remain, including whether finality of settlement is to be determined by a central trusted party or by a majority of participants, and whether participants are able to view information on other parties ’ transactions. some argue that movement away from open systems undermines the potential efficiency and the spirit of dlt. at least for now, in payment, clearing, and settlement, safety and confidence must also weigh in the balance. second, firms are still grappling with the business case for upgrading and streamlining payment, clearing, settlement, and related functions with dlt. promoters of dlt offer a vision of streamlined processes that lead to faster processing, reduced reconciliation

jerome powell : innovation, technology, and the payments system speech by mr jerome h powell, member of the board of governors of the federal reserve system, at “ blockchain : the future of finance and capital markets? ”, the yale law school center for the study of corporate law, new haven, connecticut, 3 march 2017. * * * new technology and innovative businesses increasingly affect our daily financial lives. mobile devices, high - speed data communication, and online commerce are creating expectations that convenient, secure, real - time payment and banking capabilities should be available whenever and wherever they are needed. at the same time, disruptive new technologies suggest that traditional financial service providers must innovate and adapt or be left behind. against this backdrop of technological change and heightened expectations, it is worth remembering our broad public policy objectives, which are driven by the fundamental importance of the payments system in our society. today, i will lay out those objectives as we see them at the federal reserve, and focus in particular on their application in three specific areas where technological innovation is driving change : creating a real - time retail payments system, using distributed ledger technology to develop new clearing and settlement services, and the issuance of digital currencies by central banks. public policy objectives for the payments system we trust financial intermediaries to hold and transfer funds in a safe and secure manner to meet the needs of commerce. the payments system provides financial institutions and their customers a variety of ways to transfer funds, but the goal is essentially the same in all cases : to move money from one individual or business to another in a reliable, secure, low - cost, and convenient manner. the federal reserve and other central banks have adopted broad public policy objectives to guide the development and oversight of the payments system. at the fed, we have identified efficiency and safety as our most fundamental objectives, as set forth in our policy on payment system risk. 1 an efficient payments system provides the infrastructure needed to transfer money in low - cost and convenient ways. efficient systems are innovative in improving the quality of services in response to changing technology and changing demand. efficient systems are also broadly accessible through means that are convenient for consumers, businesses, and financial institutions around the country. safe payment systems are built from proven technology and operate reliably and with integrity. safe systems address a range of well - known risks, including legal, operational, security, and financial risks. information security and privacy have become particularly important in recent years. overall, the payments