During a recent speech in Sarasota, Christopher Waller, a representative of the board of directors of the US Federal Reserve System (FRS), praised the potential of blockchain technology and acknowledged its prospects for improving the payments industry.
According to Waller, blockchain is a distributed database that stores information about cryptocurrency transactions and digital asset ownership.
He further stated that blockchain is suitable for use in the same way for traditional assets, including securities and derivatives that can be tokenized.
The official believes that the use of blockchain technology can provide round-the-clock transfers in real-time, which will allow the parties to control settlement time and reduce risks and improve liquidity.
Tokenized assets also offer the advantage of programmability and the use of smart contracts.
The execution of smart contracts is automatic, based on agreed conditions, and does not depend on the participants in the transaction.
Tokenization of assets can be particularly beneficial for delivery versus payment (DVP) and payment versus payment (PVP) settlements, reducing counterparty settlement and credit risks.
Many private companies are already transacting with foreign currencies using blockchain and smart contracts, but their implementation is still in the early stages, warned Waller.
The official noted that there are vulnerabilities in blockchain technology, which should not be ignored.
In 2020, Waller opposed the idea of launching a digital dollar, as he believes that the Fed’s digital currency is unlikely to improve US dollar payments.