New York Fed Flags Market Structure Shifts as Key to Dollar’s Global Role

The New York Fed has highlighted the rapid evolution of financial market infrastructure as a growing consideration for monetary policy implementation, signalling that innovations such as tokenisation, stablecoins and AI-driven trading are becoming increasingly relevant to how the Federal Reserve executes policy rather than whether it changes policy.

Speaking at the Fifth Conference on the International Roles of the US Dollar, Lisa Chung, head of domestic and international markets at the New York Fed, said technological advances are reshaping the mechanics of financial markets, requiring policymakers to understand how changing market structures could affect liquidity, price discovery and the transmission of monetary policy.

Chung stressed that the dollar’s international role continues to rest on familiar foundations: the strength of the US economy, price stability, deep and liquid financial markets and reliable payment infrastructure. However, she argued that changes in market infrastructure – including tokenised assets, digital payment rails, 24/7 trading and atomic settlement – could influence how those foundations function in practice.

^“Digital ledger technology is advancing, allowing financial assets – both money and securities – to be converted into digital tokens such as stablecoins, which are now being used in markets and not just tested in experiments. 24/7 trading and atomic settlement capabilities are increasing trading efficiencies. More and more, AI-driven algorithms are prevalent and provide new trade execution methods,” she said.

As the foundations of the market change, the dollar’s role could also be impacted. Chung emphasised the importance of preparing for these changes, noting that the New York Fed’s Open Market Trading Desk is expanding its monitoring of market developments, conducting technical experiments through the New York Innovation Center and collaborating with international initiatives examining wholesale cross-border payments and tokenised financial markets. Projects including Cedar, Pine and the BIS-led Project Agora were cited as examples of this work.

She also pointed to the increasing institutional adoption of digital assets since the conference series began in 2022, suggesting that developments once viewed as experimental are now moving into mainstream market infrastructure discussions.