Central Banks Can Shape the Future of Digital Finance

Like every other big central bank, the Federal Reserve is preoccupied with the economic consequences of the pandemic. For now, managing unprecedented supply shocks is its first order of business. But another issue is also commanding close attention, albeit more quietly. In due course it will emerge from the sidelines, assume enormous importance, and implicate every aspect of central-bank policy: What, exactly, is the future of money?

In pondering this question, the Fed and its counterparts aren’t leading a revolution so much as struggling to catch up with one. Technology has transformed the monetary system in recent years, and at an accelerating pace. Paper money is falling out of use as consumers gravitate toward more convenient electronic payments, using bank accounts, credit cards and other online systems.