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Discussion Paper
The Dueling Intraday Demands on Reserves
A central use of reserves held at Federal Reserve Banks (FRBs) is for the settlement of interbank obligations. These obligations are substantial—the average daily total reserves used on two main settlement systems, Fedwire Funds and Fedwire Securities, exceeds $6.5 trillion. The total amount of reserves needed to efficiently settle these obligations is an active area of debate, especially as the Federal Reserve’s current quantitative tightening (QT) policy seeks to drain reserves from the financial system. To better understand the use of reserves, in this post we examine the intraday ...
Discussion Paper
Interoperability of Blockchain Systems and the Future of Payments
In a previous post, we introduced a three-pillar framework for interoperability of payment systems and discussed how technological, legal, and economic factors contribute to achieve interoperability and aid in the “singleness of money”—that payments and exchange are not subject to volatility in the value of the money itself—in the context of legacy systems. In this post, we use the framework to characterize the interoperability of blockchain systems and propose a methodology for evaluating interoperability. We show evidence of limited interoperability and draw insights for the future ...