In a speech last week, Federal Reserve Governor Christopher Waller argued that “not all frictions that slow down payments are bad”. While he was mainly questioning the interconnection of faster payment systems, he touched on correspondent banking.
As context, the Bank for International Settlements (BIS), the central bank to the central banks, is working on Project Nexus for interlinking faster payments via its innovation hub. Additionally, Project Agorá plans to use tokenization and wholesale CBDC to speed up cross border payments via correspondent banks. The Federal Reserve Bank of New York is a participant in that project, but “strictly for research and experimentation.”
While Governor Waller acknowledged that it’s desirable for remittances to arrive faster, the heart of his objections were in one paragraph:
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