The head of the Federal Reserve’s New York Innovation Center (NYIC), Per von Zelowitz, joined Wilson Sonsini partner Jess Cheng for a conversation on the central bank’s payments innovation initiatives regarding the future of money and new financial market infrastructures at an American Bar Association (ABA) Business Law Section event in New York City on June 7, 2023.1 This alert briefly summarizes the event’s key takeaways.
The discussion illuminated the attention the U.S. central bank is giving to blockchain and distributed ledger technology (DLT) for improving the efficiency of payments, clearing, settlement, and trading systems. Importantly, the conversation highlighted the sophisticated, forward-thinking research underway at the NYIC in enhancing the movement of money and transfer of financial assets—as well as the emphasis it places on the role of collaboration with private sector partners.
Fintech companies should pay close attention to the NYIC’s experimentation in digital currencies and its prototyping of new DLT-based foundations for next-generation infrastructure. These initiatives may yield new opportunities for responsible payments innovation by the private sector. More immediately, they offer expert and objective articulations of potential value propositions for emerging technologies. Experienced legal counsel fluent in both financial technology and payments law can assist fintech companies to act on these insights and opportunities.
Key Insights on the Central Bank’s Cutting-Edge Research
The NYIC is a strategic partnership between the New York Fed and the Bank for International Settlements, established in 2021 to explore the potential of technological innovation in central banking to benefit the global financial system. The NYIC team works with a range of partners, including other central banks and private-sector financial institutions and technology providers.
Mr. von Zelowitz and Ms. Cheng also discussed how technology trends often progress slowly until an inflection point is reached, after which developments proceed quickly. The NYIC aims to keep pace with these trends by conducting rigorous research on emerging technologies in relatively nascent stages, with the goal of being well-positioned to support the private sector when momentum builds around such technologies.
Experienced legal counsel can likewise assist fintech companies in keeping a pulse on the central bank’s innovation priorities, staying attuned to the areas of opportunity, and ensuring alignment in approaches to traditional and emerging payment system risks.
The experience of the NYIC—as well as other financial institutions and fintech companies—makes clear that payments innovation requires open-mindedness to potential use cases for new technologies, business-minded pragmatism to delivering viable solutions, and creativity in considering their legal and possibly regulatory ramifications.
Wilson Sonsini Goodrich & Rosati advises clients at the forefront of payments innovation to creatively navigate the complex and evolving legal issues in adopting new technologies and building novel systems. Please do not hesitate to contact Jess Cheng or another member of Wilson Sonsini’s fintech and financial services or payments practices for more information.
 Mr. von Zelowitz noted that the views expressed in the event were solely those of his own and should not be interpreted as reflecting the views of any Federal Reserve Bank, or the staff of the Federal Reserve System.