Hear The Latest On Artificial Intelligence at the Fed and the Potential Launch of a Digital Currency
Ric Edelman: I'm very excited to bring back onto the program my good friend Sunayna Tuteja. Sunyna is the Chief Innovation Officer of the Federal Reserve System. Wait, what innovation? The Fed, really? But Sunayna, Innovation. Central Bank. Isn't that an oxymoron?
Sunayna Tuteja: Ric, it's like you read my mind. When I first got the call about this role about a year ago, I first thought it was one of our Bitcoin friends pulling some sort of a prank on me. So I definitely give the Fed a lot of credit. They are bringing in a diversity of perspectives and experiences to level up innovation within the Federal Reserve System I think is a pretty solid signal.
Ric: And it's frankly very reassuring because technology is growing at a very aggressive pace, as we know broadly and within the fintech space. You and I have been working together for many years. We've been on stage together in front of a couple of thousand people. Talk about why the Fed reached out to you to focus on innovation.
Sunayna: I have spent pretty much my entire career at the nexus of tech, finance and policy. I've been super grateful to have had really awesome assignments, leading change and innovation at this nexus, both in North America but also in Asia. The common denominator for me, Ric, has always been how are we purposefully harnessing the power of these frontier technologies, AI, machine learning, DLT, you name it. But how are we doing it in a purposeful way? So we're breaking down barriers that still persist in financial systems so that every consumer finds banking, insurance, trading, you name it, both accessible and also approachable.
Ric: I can see how the word innovation is a scary word for a lot of the career employees at the Federal Reserve. I mean, think about it. The Federal Reserve is the most fundamental, basic element of our nation's financial system. And because we're the world's largest economy and the dollar is the currency that is really used globally, we're at the nexus of the entire global economy. So the last thing we want to do is do anything that could create interference or problems in the stability of the global economy. So let's not innovate because innovation means change and change means new and new means we might make mistakes, we might break something - the notion of innovation. And that can raise a lot of fear among folks saying, oh, my goodness, might we mess anything up? So what does innovation look like at the Federal Reserve?
Sunayna: That's a great premise. And we should never forget the scale, the scope and the stability that the Federal Reserve brings, not just to US financial systems, but around the world. Innovation is alive and well, and I make it very clear innovation does not start and stop with the chief innovation officer. The Federal Reserve System of the United States is a compilation of 12 reserve banks and the Board of Governors in DC. There is lots of great activity happening in advancing innovation and I am one node in that decentralized network.
How The Federal Reserve Uses AI
Ric: Artificial intelligence is one of the most innovative of all technologies. Is the Fed using A.I. in any way, and if so, how?
Sunayna: Yeah, absolutely. A.I. machine learning have been technologies that have been deployed within the Fed before my coming in. We're starting to do a lot of work around Quantum. Now, Quantum, if you look at the S-curve of innovation, is not ready for execution. But as leaders within the Federal Reserve System, it is something that we should be learning and exploring and understanding. And the Fed is uniquely qualified to kind of lean in and explore, experiment or execute.
Ric: Can you give me an example of how the Fed might be using artificial intelligence?
Sunayna: The Fed employs over 5,000 technologists. We are a massive technology business. Think of all of the payment rails that the Fed runs and supports every day. Behind the scenes, there are product leaders, there are technologists, there are developers, there are scrum teams that are making sure that we are building, scaling and operating these systems with efficiency.
Ric: The Federal Reserve continues to print paper. The US Treasury is continuing to print all the money on paper (we know it's not really paper but close enough), and we spend a lot of money printing that paper. We spend a lot of money transferring it from bank to bank around the country. We spend a lot of money on security to safeguard all of that money. There aren't too many other businesses that are still operating in that way. We've gone digital everywhere else. And that raises the basic question why are we not creating a digital dollar in turning money into electronic format like everything else? This is known as a central bank digital currency (CBDC) and this is a big conversation all around the world. Central banks globally are all exploring the idea of launching a digital version of their currency. A couple of them already have, as you know. So tell us about the US Central Bank. Tell us about the Federal Reserve and its attitude about a CBDC. Are you working on one? Do you think we might eventually see one? And what are the details?
Is a CBDC Coming To The US Anytime Soon?
Sunayna: You know, it is not a binary answer of should we, or shouldn't we? Here's a whole list of questions that we're still grappling with. We are currently in an open comment period and we are encouraging anybody who would like to share their perspectives. Because right now, our goal is to take in a diversity of perspectives as we interrogate these questions. So one of the things is read the paper and please join in the comment period. Google the future of money or the Federal Reserve discussion document, and it will come up.
Ric: Let me ask you this. I'm going to put you on the spot, and I will provide on your behalf all the disclosures that you are going to want to make sure everybody understands. That I'm going to ask Sunayna for personal conjecture that she is not speaking on behalf of the Fed and she is not outlining any official statement on behalf of the Federal Reserve. Okay. With that in mind, you're ready for this, Sunayna?
Sunayna: Bring it!
Ric: Assuming everything goes as well and easy as it could possibly go, and the conclusion is that the Fed does want to launch a CBDC, what's the earliest that a digital dollar could actually be implemented?
Sunayna: Oh, man, thank you for all of those disclosure statements. I appreciate it. This is total conjecture and assumption. I think that five year mark seems like a logical starting point because there's so much that needs to be interrogated and it's not a unilateral decision by the Fed.
Ric: I think a lot of folks would assume that this isn't something that will happen for decades. My point is, I think we need to recognize that digital money is in our future.
Sunayna: Yeah, I mean, this in the future is very exciting. And how often do you get to think about these macro questions and how to maybe shape them? You know, I wasn't around when the Internet was going commercial and changed everything in the world. So I think the fact that leaders like you are obsessing about this is pretty cool. You were one of the OGs in the financial planning industry that started talking about bitcoin and crypto when it was not fashionable, right? I was taking a significant career risk where people think I got yelled out of and laughed out of plenty of board of directors and senior leader meetings trying to say, Hey, there's something happening here and we need to be thinking about it and doing something with it. And I think people are starting to figure out what are those killer apps that are going to come out of this technology and ecosystem. So I find that one of the most encouraging signals.
Ric: If digital money is in our future, in some fashion, some form or what have you, should consumers fear that? Is that scary or is it exciting?
Sunayna: I think it's always a little bit of both with any new technology. Oftentimes when you're leading innovation, the question you get so used to getting asked is, well, what is the risk of doing this? But there's a follow up question I always also ask, which is, what is the risk of not doing it? And we have to have that honest conversation. And it's our job to manage, mitigate, minimize those risks. But then we also have to talk about what is the risk if we don't drive this change, right? When the iPhone first came out, it was so we could play Candy Crush, right? Nobody thought that this would be the device on which we would be running our personal and professional lives. And if you suggested that, people would be like, what are you talking about? So I obsess about what is the next generation of consumers? What behaviors and expectations are they growing up with because they are going to have needs that we have to meet if we are going to be relevant, any business of any stripe.
Ric Edelman: That is Sunayna Tuteja, the Chief Innovation Officer of the Federal Reserve here on The Truth About Your Future. Sunayna, thanks so much for joining us on the program today.
Sunayna Tuteja: Thank you for the opportunity, Ric.
Ric Edelman: If you would like to comment on the Fed's efforts to investigate a central bank digital currency, just Google the future of money and you'll be able to make your comments that the Fed staff will read. Just Google the Future of money.