Jerome Powell’s tenure as Federal Reserve Chair will largely be remembered for inflation battles and post-pandemic monetary policy. Yet beneath the headlines, the Fed also found itself pulled deeper into the future of money, from real-time payments and stablecoins to digital dollars and fintech regulation.
When Jerome Powell became Chair of the Federal Reserve in 2018, the US central bank still largely viewed payments infrastructure as background plumbing for the financial system.
By the end of his tenure, the Fed was operating its own instant payments rail, fielding political criticism over a potential central bank digital currency (CBDC), warning Congress about stablecoin risks and navigating a financial ecosystem increasingly shaped by fintech firms rather than traditional banks.
Powell did not set out to become a central banker associated with payment innovation. Much of the shift was forced upon the Federal Reserve by broader market changes, technological disruption and the acceleration of digital finance during and after the Covid-19 pandemic.
Yet the result was a significant expansion in how the Fed approached payments, financial infrastructure and digital money.
As Kevin Warsh prepares to take over leadership of the US central bank, the transition raises questions not only about interest rates and monetary policy, but also about how actively the central bank should shape the future of payments in the US.
FedNow became Powell’s clearest payments legacy
For much of Powell’s tenure, the Federal Reserve faced growing criticism that the US had fallen behind other markets in real-time payments.
Countries including the UK, India and Brazil had already implemented instant payment systems with widespread consumer adoption, while the US remained reliant on slower ACH infrastructure and fragmented banking rails. This changed in July 2023 with the launch of FedNow, the Federal Reserve’s long-awaited instant payments network.
The platform allows participating financial institutions to settle payments in real time, operating around the clock rather than within traditional banking hours. Although the private sector had already moved into real-time payments through The Clearing House’s RTP network, the Fed argued that a public-sector alternative was necessary to ensure nationwide access and competition.
The project had been years in development before Powell became Chair, but its launch ultimately became one of the defining infrastructure achievements of his tenure.
The Covid-19 pandemic accelerated the urgency around faster payments. During lockdowns, delays in distributing stimulus payments exposed how uneven and outdated parts of the US payment system remained.At the same time, fintech firms and challenger financial platforms were conditioning consumers to expect immediate access to funds.
“Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses.” – Powell, May 2021
FedNow therefore arrived not simply as a technology project, but as part of a wider debate over financial inclusion, resilience and whether critical payment infrastructure should remain dominated by private-sector providers.
The rollout has remained gradual compared to instant payment systems elsewhere. Adoption among financial institutions has continued to grow, though the network still faces questions around interoperability, consumer awareness and competition with existing private rails.
Nevertheless, FedNow marked a notable philosophical shift. Under Powell, the Federal Reserve moved from acting primarily as a regulator of payment systems to becoming a more direct operator within them.
Stablecoins forced the Fed into digital asset politics
If FedNow represented the Federal Reserve’s operational response to payment modernisation, stablecoins represented its regulatory challenge.
When Powell first became Chair, stablecoins remained a relatively niche corner of the cryptocurrency sector. This changed rapidly after Facebook announced plans for Libra, later renamed Diem, in 2019.
The proposal alarmed policymakers globally.
A technology company with billions of users attempting to launch a private global currency forced central banks to confront a possibility they had previously treated as theoretical: major payment systems emerging outside traditional banking and sovereign monetary structures.
Powell became increasingly vocal about stablecoin oversight during subsequent congressional hearings, often stressing concerns around consumer protection, financial stability and illicit finance risks.
Over time, stablecoins evolved from speculative crypto tools into a more systemically relevant issue for regulators and central banks. Dollar-backed stablecoins such as USDT and USDC began facilitating large volumes of global crypto trading, cross-border settlement and digital asset liquidity.
By the later years of Powell’s tenure, stablecoin debates had become intertwined with larger geopolitical and financial questions, including US dollar dominance, Treasury market exposure and the future structure of digital payments.
The Federal Reserve itself adopted a relatively cautious stance.
“Stablecoins are like money-market funds, are like bank deposits, but they’re to some extent outside the regulatory perimeter, and it’s appropriate that they be regulated. Same activity, same regulation.” – Powell, September 2021 congressional testimony.
Unlike some parts of the crypto industry, Powell repeatedly emphasised that stablecoins performing bank-like functions should face bank-like regulation. This position broadly aligned with wider efforts by US regulators to bring stablecoin issuers under clearer supervisory frameworks.
However, the Fed also faced criticism from parts of the digital asset sector which argued US policymakers risked slowing innovation while jurisdictions such as the European Union advanced dedicated crypto regulatory regimes through frameworks like MiCA.
The balancing act reflected a broader theme of Powell’s tenure: the Federal Reserve increasingly recognised that payments innovation could not simply be ignored, while remaining wary of financial activity moving beyond traditional regulatory boundaries.
The digital dollar became a political flashpoint
Few topics illustrated the politicisation of modern central banking more clearly than the debate around a US central bank digital currency (CBDC).
Under Powell, the Federal Reserve moved cautiously on the issue. The central bank published discussion papers and explored the potential implications of a digital dollar, but consistently avoided committing to any launch timeline.
Powell repeatedly stressed the Fed would not proceed without support from Congress and the executive branch. This cautious approach contrasts with the more aggressive rollout strategies pursued elsewhere, particularly China’s development of the digital yuan.
Yet even the exploration of a CBDC became politically controversial in the US. Critics, particularly among Republican lawmakers, increasingly framed digital dollar discussions around concerns over financial surveillance, state control and privacy.
At the same time, some policymakers and economists argued a CBDC could help modernise payments infrastructure, strengthen financial inclusion and preserve the role of sovereign money in an increasingly digital financial system.
The Fed therefore found itself pulled into ideological debates extending well beyond monetary policy. Powell largely attempted to position the institution as a neutral evaluator of the technology rather than an active advocate. Still, the controversy demonstrated how rapidly payments infrastructure had become a politically sensitive territory.
Questions once confined to fintech conferences and academic papers were now appearing in congressional hearings and presidential campaign rhetoric.
Fintech changed the boundaries of financial regulation
While the Federal Reserve does not directly regulate every aspect of consumer fintech, Powell’s tenure coincided with a period in which the boundaries between banking, technology and payments became increasingly blurred.
Buy-now, pay-later providers expanded rapidly during and after the pandemic, offering alternative forms of short-term credit outside traditional credit card structures.
Digital wallets gained further traction. Embedded finance models accelerated. Open Banking discussions also gained momentum in the US, particularly around consumer data rights and API-driven financial services.
Much of the regulatory activity in these areas sat outside the Federal Reserve itself, particularly within agencies such as the Consumer Financial Protection Bureau.
Nevertheless, the broader shift placed growing pressure on central banks and regulators to reconsider how financial oversight should function in a platform-driven economy.
Under Powell, the Federal Reserve generally maintained a measured and conservative posture toward these developments. Rather than aggressively promoting fintech innovation, the institution focused more heavily on systemic stability and resilience. This approach reflected Powell’s broader leadership style. Throughout much of his tenure, the Fed sought to avoid appearing either hostile toward innovation or overly enthusiastic about emerging financial technologies whose long-term implications remained unclear.
A different Federal Reserve under Kevin Warsh?
As Warsh prepares to succeed Powell, much of the attention will understandably focus on inflation, interest rates and the future independence of the Federal Reserve.
Yet the payments and digital finance landscape awaiting the next Fed Chair looks markedly different from the one Powell inherited in 2018.
Stablecoins now represent a multi-trillion-dollar market globally. Real-time payments infrastructure is operational. Digital asset legislation is advancing through Congress. Technology firms continue pushing deeper into financial services.
Warsh’s public commentary has historically leaned toward market-oriented economics and a more restrained view of central bank intervention. Compared to Powell’s tenure, which gradually saw the Fed pulled deeper into payment infrastructure and digital finance debates, Warsh may ultimately favour a lighter-touch approach toward private-sector innovation.
However, there remains relatively limited public detail on Warsh’s specific positions regarding stablecoins, BNPL, open banking or CBDCs. That itself may become significant.
