The U.S. Treasury Department building in Washington, D.C.
A senior U.S. Treasury official warned about potential risks to international financial stability and economic security from any cross-border payments systems that fail to adhere to standards aimed at minimizing illicit activity.
While Brent Neiman, Treasury assistant secretary for international finance, didn’t specify any particular system that poses such a threat, his remarks come just weeks after leaders from the BRICS grouping (including Brazil, Russia, India, and China) signed a communique that included a call to work on an independent cross-border payments system aimed at bypassing Western platforms. “The United States must lead when it comes to cross-border payments, to maximize the chances that any new systems with significant international usage reach the quality and standards we prefer,” Neiman said in prepared remarks for delivery to a Federal Reserve Bank of New York conference Tuesday.
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“Enhancing connectivity” with the United States can benefit its trading partners as well as “invite a deeper and more transparent commitment to shared policy goals, like combatting illicit finance,” he added. While the government “should avoid picking winners and losers in payments technology,” Neiman noted that U.S. agencies form part of delegations to international standards-setting bodies, which should be “active and vocal” in ensuring those institutions keep pace with change.
Washington should also work on developing a clear regulatory framework for stablecoins, as well as a federal payments framework, he continued. Under the current arrangement, regulation of nonbank and e-money payment service providers varies from state to state. “Making the dollar-oriented system faster and more efficient would strengthen our hand in upholding U.S. values like privacy and in bolstering both our national security and that of our allies,” the Treasury official said.
By contrast, “if a poorly designed payments system were widely adopted” for cross-border transactions, “it could do significant harm to international financial stability and economic security,” Neiman said. Policymakers and industry participants should “be very skeptical of any project that seeks to wipe the slate clean; or avoid safeguards in the current system; or omit, elide, or avoid strong and transparent governance and oversight,” he added.
While Neiman noted that the U.S. election result this month means he will be departing his role in a couple of months, the “cross-border payments agenda is an area where there is significant and broad-based agreement” across both the main political parties.
The New York Fed’s conference comes at a time when the foreign exchange (FX) market is “undergoing important shifts in the types of market participants, the jurisdictions in which they transact, and the mix of instruments traded, all within an ecosystem that has become increasingly complex,” the bank said.
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