for release on delivery 4 : 10 p. m. est ( 1 : 10 p. m. local time ) february 5, 2020 the digitalization of payments and currency : some issues for consideration remarks by lael brainard member board of governors of the federal reserve system at the symposium on the future of payments stanford graduate school of business stanford, california february 5, 2020 i want to thank darrell duffie for inviting me to discuss the future of payments. 1 digitalization is enabling consumers and businesses to transfer value instantaneously, technology platforms to scale up rapidly in payments, and new digital currencies to facilitate these payments. by transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost. but there are risks. some of the new players are outside the financial system ’ s regulatory guardrails, and their new currencies could pose challenges in areas such as illicit finance, privacy, financial stability, and monetary policy transmission. given the stakes, the public sector must engage in order to ensure that the payments infrastructure is safe as well as efficient and fast, assess whether regulatory perimeters need to be redrawn or new approaches are needed in areas such as consumer data and identity authentication, and explore the role of central bank digital currencies in ensuring sovereign currencies stay at the center of each nation ’ s financial system. these issues are complicated and consequential. i will only touch on them today in the spirit of sketching out an agenda for the public sector along with the private sector and research community. digital players technology firms — from bigtechs to fintechs — are driving the digital transformation of payments. not only are the new players bringing innovation to the way payments are made between businesses and consumers and peer - to - peer, but they are bringing new business models that bundle payments with other activities in novel ways. payments have traditionally been a service provided by trusted intermediaries such as banks. the operations of banks and some related financial service providers, such as card i am grateful to paul wong and jacqueline cremos of the board of governors of the federal reserve system for their assistance in preparing this text. these remarks represent my own views, which do not necessarily represent those of the board of governors or the federal open market committee. companies, are subject to regulatory oversight for sound risk management. banks offer important consumer protections, including deposit insurance, error resolution, and fraud protection. in addition to providing payments services, banks generally provide

provide and facilitate the clearance of retail payments, such as cheques, bank drafts and off - line fund transfers. in 2002, the central bank authorized lankaclear ( pvt ) ltd to provide cheque clearing facilities as the agent of the central bank. in may 2006, the central bank and lankaclear jointly launched the cheque imaging and truncation ( cit ) system, which facilitates electronic presentment of cheque images, instead of the physical cheques being transported to colombo for clearing. the cit system introduced a uniform cheque clearing time schedule of t + 1 & t + 2 throughout the country, enabling commercial banks, in most instances to credit cheque proceeds to their customers'accounts on the following or next business day. the island - wide cit system has also changed the technology - related landscape of the retail segment of payments and clearing. these state - of - the - art systems have facilitated the banking industry to perform three major functions, i. e. access to and management of liquidity ; provision of speedy payment services ; and mitigation of risks relating to payments and clearing. these new technologies have not only reduced the use of manual processes, but also brought in a number of benefits to the banking industry in finalizing their settlements on an on - line and real time basis. 5. business continuity plans and operational risk mitigation 5. 1 it advancements call for operational risk mitigation by banks. more recently, the central bank has encouraged banks to draw up business continuity plans ( bcps ), focusing on their core banking solutions, back - up systems and disaster recovery sites ( drs ). the central bank, being the owner and operator of the core payment systems, is keen to ensure that the banks have put in place adequate processes and systems to deal with any disruption to core banking and payment services. it took a considerable length of time to convince banks of the importance of having bcps, back up systems and drss. evidently, the establishment of these systems has given confidence to the customers that banks are in a position to deal with emergencies that could occur at any time. 5. 2 with the advancement of it and customers becoming comfortable with new technology, they demand greater convenience, reduced transactions costs and higher quality banking products and services. the reliability of the products and services are assured to a large extent by the attention paid to bcps by banks. while these have increased productivity in the banking sector, banks have had to spend more