michelle neal : advances in digital currency experimentation remarks by ms michelle neal, executive vice president and head of markets of the federal reserve bank of new york, at the singapore fintech festival 2022, singapore, 4 november 2022. * * * as prepared for delivery good afternoon. it is a pleasure to be here with you at the singapore fintech festival. it is exciting to be a part of this gathering of industry professionals, policy leaders, and investors to discuss key developments in the fintech industry. digital innovation has the potential to benefit the financial system writ large by reducing transaction costs, increasing competition, and broadening access to a wider range of participants. however, harnessing the full potential of financial innovation and related technologies – especially regarding cross - border settlements and payments – will require collaboration across a range of international partners. in my remarks today i will discuss the landscape of digital assets and some of the ways that the federal reserve system is engaging in research and experimentation that support ongoing innovation. as always, the views i express today are my own, and do not necessarily reflect those of the federal reserve bank of new york or the federal reserve system. digital assets and the federal reserve we are all experiencing the incredible pace of growth and change within the digital asset domain, which encompasses a range of opportunities and risks. the market capitalization of digital assets reached $ 3 trillion in november 2021. 1 the rapid growth of digital assets presents opportunities to both reinforce the role of central banks and regulatory bodies in stewardship of the global financial system and be positioned at the technological frontier. however, this growth is not without risks : in may, the crash of terra, an unbacked algorithmic stablecoin, and the subsequent wave of insolvencies, wiped out over $ 600 billion of investor and consumer funds. 2, 3 currently, the total cryptoasset market capitalization rests around $ 1 trillion, a 66 percent decline from its november 2021 peak. when i consider the ways in which digital assets impact the mission of the federal reserve, i see several channels – including monetary policy and the provision of an elastic currency, the preservation of financial stability, and the smooth operation of the payments system. regarding monetary policy and currency, in january, the federal reserve released a discussion paper that considers a future where digital assets may play a large role in our financial system, and in particular, establishes some broad principles and outlines some of the pros and cons of a central bank digital currency, or cb

team was able to demonstrate the potential for usage at scale, which would be a key design element of a retail cbdc. 6 as a complement, and in line with the new york fed's unique role in the federal reserve system with wholesale payments in both domestic payments and foreign exchange, the new york innovation center is researching technical aspects related to wholesale cbdcs. in addition to cbdc, the broader digital assets landscape, which includes stablecoins – cryptoassets that are backed by assets such as u. s. treasury securities to stabilize their value – and unbacked cryptoassets, has grown significantly in recent years, and continues to evolve quickly. while many digital - asset - related activities fall within existing u. s. laws and regulations, the rapid evolution and adoption of digital assets highlight unique risks that warrant a more comprehensive and aligned approach by agencies across the u. s. government with different regulatory remits. the federal reserve, as an independent central bank, is only one part of the puzzle. many of these other stakeholders across the u. s. government, such as the treasury department, market regulators, and federal banking supervisors, will be involved in providing guidance and guardrails to the financial system as the universe of digital assets continues to evolve. 7 in the current environment of rapid technological change, it is crucial that innovation proceeds responsibly in order to safeguard the stability of the financial system. to that end, on march 9 of this year, president biden issued an executive order on ensuring responsible development of digital assets. 8 this executive order outlined the first whole - of - government approach to addressing the risks and harnessing the potential 2 / 5 bis - central bankers'speeches benefits of digital assets and their underlying technology. in response, over the past six months, agencies across the government have worked together to develop frameworks and policy recommendations that advance the six key priorities identified in the executive order : consumer and investor protection ; promoting financial stability ; countering illicit finance ; u. s. leadership in the global financial system and economic competitiveness ; financial inclusion ; and responsible innovation. the executive order will be a catalyst to increased coordination among u. s. regulators. last month, as part of the approach outlined in the executive order, the financial stability oversight council, or fsoc, released a report that considers the financial stability risks of crypto assets. in the report, the fsoc noted that financial stability risks of crypto assets