Opportunities of digital currency

The New York Federal Reserve opened a new innovation center on Monday designed to help the central bank research the possibilities of a digital currency, assess the financial risks associated with climate change, and other topics such as financial market infrastructure and regulation.

The center, which is operated in partnership with the Bank for International Settlements (BIS) Innovation Hub, aims to help the central bank improve the current payments system, Fed Chairman Jerome Powell said in a speech he gave for a virtual event on Monday had prepared.

"In particular, the partnership will support our analysis of digital currencies, including central bank digital currencies," said Powell, adding that the center will focus on making cross-border payments faster and cheaper and providing new tools for overseeing financial firms.

Powell made no comment on his outlook for the economy or monetary policy.

The Fed is currently considering whether to introduce a digital version of the US dollar, and the Fed board is working on a discussion paper that will examine the political issues surrounding a central bank digital currency.

New York Fed researchers have also developed an approach to measuring banks' exposure to climate-related risks, which could be a first step in assessing whether financial institutions have enough capital to withstand those risks.