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Federal Reserve Keeps One Eye on Bitcoin

On the 26th January 2015, the Federal Reserve Released a document discussing plans to improve payment systems in the US.

fed quote 1The Federal Reserve is seeking comment from the public regarding its new mission on improving payment systems. The “Engage for Change” campaign took to the stage on Monday in accordance with a 58 page publication, Strategies for Improving the U.S. Payment System (the Paper).

“The Federal Reserve believes that the U.S. payment system is at a critical juncture in its evolution. Technology is rapidly changing many elements that support the payment process.”
— – Strategies for Improving the U.S. Payment System, The Federal Reserve System

After sponsoring a Payment Security Landscape Study, mentioned in the Paper, it was brought to the Federal Reserve’s attention that there are several key areas of improvement.

“Technologies exist that can strengthen U.S. payment security (e.g., encryption, tokenization and stronger authentication)” – Federal Reserve

The Paper illustrates the Federal Reserves focus on safety, efficiency, security and accessibility to payment systems. These areas are stated as contributing directly to the nation’s financial stability and economic growth, as payments are the common denominator between facilitating commerce and enabling the transfer of value.

There is an acknowledgment that high-speed data networks are becoming more ubiquitous, and that computing devices are becoming more sophisticated and mobile. As a result information is being processed in real time. The paper states, “Considering these developments, traditional payment services, often operating on decades-old infrastructure, have adjusted slowly to these changes, while emerging players are coming to market quickly with innovative product offerings."

"There is opportunity to act collectively to avoid further fragmentation of payment services in the United States that might otherwise widen the gap between U.S. payment systems and those located abroad.“
— – Federal Reserve

The paper goes on to highlight specific issues within the US system, including Business to Business (B2B) settlement, “Adoption of electronic B2B payments is increasing, but billions of paper checks continue to be written by businesses each year. Among large businesses, checks represent more than half of payments sent and received; among small and micro businesses, these percentages are more than 70 percent and 90 percent, respectively.”

These figures may show a slow uptake in digital money transfer systems, but the paper elaborates on the problems surrounding legacy electronic payment solutions, “There are numerous barriers to increasing adoption of electronic payments including (1) electronic payments are more complex to implement than checks; 2) virtually all businesses can issue or receive checks but electronic payment capabilities are not ubiquitous; 3) small- and medium-size businesses often find it difficult to obtain support from their financial institutions to implement electronic payments; 4) it’s difficult for payers to easily find, manage and use the electronic payment identity of their payees; and 5) it’s difficult to exchange payment related information electronically (e.g., invoices).”

As well as replacing checks, mentioned 24 times, the Paper states that, “Faster payments capabilities have the potential to draw more of the unbanked/underbanked population into the financial mainstream,”

The aim of the campaign, accompanying  the Paper, is to get community feedback as stated on the  Federal Reserve Banks site,, “We welcome your comments and questions about the paper. Which of these strategies are most important to you? What challenges does the industry face in achieving the desired outcomes?”

In stark contrast to the reactive US approach, the Canadian Committee on Banking invited Andreas Antonopoulos to explain 21st Century electronic payments solutions, specifically Bitcoin,

“I am fascinated by the idea of being able to deploy bitcoin on a Nokia feature phone in Kenya and Lagos, Nigeria, and bringing online to the global economy people who have never had access to financial services with international credit, and who could now be connected to everyone else in the world on an equal footing.  That is exciting to me, and that’s where the greatest need lies that bitcoin can fulfil.”
— – Antonopoulos

Supporting  a twitter account has been created, as a means to engage with the public. Although only just released, cryptocurrency enthusiasts have begun to bring attention to Bitcoin technology that could truly provide what the Federal Reserve seeks to allegedly achieve.

@FedPayImprove Instead of re-tooling a broken legacy system why not just use #Bitcoin.” CoinfeedIO via twitter

Initially the Federal Reserve outlined a timeframe of 10 years, in their Consultation Paper written in 2013, to achieve its stated goals. The Paper states this is not sufficiently aggressive.


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