Crypto Currents: Fed talks innovation, stablecoin bank access

The future of payments, including crypto, stablecoins, and AI, took center stage at the Federal Reserve’s Innovation Conference yesterday, alongside discussions about potentially granting stablecoin issuers direct access to Fed accounts. Elsewhere, Siemens adopts JPMorgan’s blockchain forex platform. Stay up on the crypto news that matters with “Crypto Currents,” daily from The Fly. Join us 2 PM daily for your essential briefing on the fast-moving world of cryptocurrency on FlyCast radio. Also, subscribe to our YouTube channel for the Crypto Fly By weekly recap.

FEDERAL RESERVE HOSTS PAYMENTS INNOVATION CONFERENCE: The future of payments was the central theme as the Federal Reserve convened its Payments Innovation Conference on Tuesday, uniting key players from both the established financial sector and the cryptocurrency space. In both opening and closing addresses, Fed Governor Christopher Waller underscored the central bank’s dedication to encouraging innovation alongside exploring how public infrastructure can support these advancements. Highlighting the Fed’s heightened focus on digital assets, the conference included focused discussions on connecting traditional and decentralized finance, various stablecoin applications, the impact of AI on payments, and asset tokenization.

Central discussion points involved adapting Federal Reserve systems for decentralized finance, or DeFi, compatibility, leveraging AI to combat fraud, and mitigating economic concerns such as potential bank deposit outflows. Experts from Chainlink (LINK-USD), Lead Bank, Fireblocks, and BNY Mellon (BK) explored methods for securely incorporating blockchain into existing financial structures. According to insights shared at the conference, Sergey Nazarov of Chainlink argued for compliance rules tailored to DeFi, while Fireblocks’ Michael Shaulov suggested wallet whitelisting as a tool for managing the open nature of blockchains.

Led by Brevan Howard Digital, a panel with executives from Franklin Templeton (BEN), BlackRock (BLK), and JPMorgan (JPM) delved into tokenizing assets such as bonds and funds. They concentrated on potential improvements in liquidity and efficiency, as well as the regulatory landscape required for institutional uptake. The role of AI was examined by representatives from Stripe, Google (GOOGL), Coinbase (COIN), and Ark Invest. They touched upon “agentic commerce,” envisioning AI agents handling transactions, possibly utilizing stablecoins for automated micro-payments. Alesia Haas, Coinbase’s CFO, shared that her company currently employs AI for fraud prevention.

Stablecoin applications were the focus for Circle (CRCL), Paxos, and Fifth Third Bancorp (FITB). They discussed programmability for business applications such as recurring payments, addressing operational hurdles such as validator risks, the necessity for common standards, and the benefit of round-the-clock transactions. Collaborations with Visa (V) and Mastercard (MA) in Latin America were presented as successful examples of enhancing user accessibility. Concluding the conference, Governor Waller emphasized collaboration and reiterated the Fed’s objective to support an evolving, robust payment system. Notably, the Fed is evaluating specialized “payment accounts,” potentially “skinny” master accounts, which could offer stablecoin issuers a more direct and efficient path to accessing the central banking system,

SIEMENS, B2C2 ADOPT JPMORGAN’S KINEXYS FOREX PLATFORM: Bloomberg reports that Siemens (SIEGY) and digital assets market maker B2C2 have started using JPMorgan’s blockchain-based platform for foreign exchange payments. The service, Kinexys Digital Payments, enables cross-border foreign exchange transactions 24/7 in USD, GBp and EUR with near-instant settlement. Thomas Restout, CEO of B2C2, said in an interview, “a key advantage of the platform is that it allows the firm to move cash at any time and respond to price swings in the always-open crypto markets,” further adding that being “tied to traditional banking rails adds complexity during bouts of volatility in crypto.” Given the ability to seamlessly move cash, Restout said, “For risk management, it’s a key piece.” The Kinexys network reportedly processes about $3B in transactions daily.

PRICE ACTION: As of time of writing, bitcoin (BTC-USD) was trading at $108,145.11, while ether (ETH-USD) was trading at $3,812.18, according to price data from CoinDesk.