Federal Reserve Examines Tokenization, Smart Contracts, and AI for Payments

TLDR

• Fed Governor Christopher Waller highlighted AI and tokenization as crucial for future payment system improvements.

• The GENIUS Act and stablecoins may increase the international role of the U.S. dollar in cross-border payments.

• The Federal Reserve has long supported private sector innovation while focusing on safe and efficient payment systems.

• Waller emphasizes the importance of collaboration with innovators to shape the future of digital payments.

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The Federal Reserve is actively researching how emerging technologies like tokenization, smart contracts, and artificial intelligence (AI) can reshape and modernize payment systems. Fed Governor Christopher Waller highlighted these advancements during his speech at the Wyoming Blockchain Symposium 2025. Waller emphasized the importance of understanding payment technology trends to support the growing overlap between traditional finance and digital assets.

“As a payment system operator, it is important to understand trends in payments technology so that we can continue to support private sector firms that leverage our infrastructures,” Waller stated. He also noted the Fed’s focus on exploring how new technologies can be integrated into existing platforms and services.

Stablecoins and the GENIUS Act’s Role in Payment Systems

Governor Waller also touched on the growing importance of stablecoins in the global payment ecosystem. He explained that stablecoins have the potential to enhance the international role of the U.S. dollar, particularly in improving retail and cross-border transactions.

The enactment of the GENIUS Act, which sets the regulatory framework for stablecoin issuance in the U.S., was singled out as a major step forward for the stablecoin market.

“Stablecoins have the potential to improve retail and cross-border payments,” Waller added. He believes that such digital assets will become more integral to the global economy as the technology matures, bolstered by recent regulatory developments.

AI Enhancing Fraud Prevention and Payment Systems

Waller also discussed AI’s role in payments, noting that machine learning has been used in the payments industry since the 1990s. AI technologies have proven effective in fraud detection, money laundering prevention, and payment trend prediction.

With the advancement of large language models and generative AI, these technologies have further improved the efficiency of payment systems, including payment reconciliation and fraud detection.

“The payment system is experiencing a technology-driven revolution,” Waller remarked. He pointed out that AI is now helping payments services become more precise and efficient, underscoring the growing convergence between new technologies and traditional payment infrastructures.

Private Sector Innovation and Fed Role

In his speech, Waller stressed that while innovation in payment systems is largely driven by the private sector, the Fed plays a critical role in providing the core infrastructure to ensure a safe and efficient system. He pointed to examples like payment cards, which have evolved through the private sector’s adoption of new technologies.

Similarly, stablecoins are another example of private sector innovation supported by regulatory frameworks, such as the GENIUS Act.

The Fed’s role, according to Waller, is to maintain the foundational infrastructure for payment systems while facilitating collaboration with innovators in the industry. He expressed a desire for increased engagement with industry leaders, especially as digital assets and traditional finance continue to merge.

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