October 21, The Federal Reserve hosted its annual Payment Innovation Conference today, bringing together central bankers, fintech executives, and policy experts to discuss the rapidly evolving landscape of digital payments and financial technology.

With the FedNow instant payment service now over two years into operation and ongoing debates about central bank digital currencies, the conference comes at a pivotal moment for the U.S. payment infrastructure. Federal Reserve officials are expected to address emerging challenges in real-time payments, cybersecurity threats, and the integration of artificial intelligence in financial services.

The day-long conference featured multiple panel discussions, each bringing together diverse voices from across the payments ecosystem. From traditional banking institutions to cutting-edge fintech startups, the lineup of speakers reflected the broad coalition needed to modernize America's financial infrastructure. Below, we provide a brief overview of the panelists who shaped each session's conversation.

Panel 1: Bridging traditional finance with the digital asset ecosystem

Moderator: Rebecca Rettig, CLO, Jito Labs

Traditional finance faces a system designed to eliminate intermediaries entirely. DeFi comprises just 4% of crypto and under 1% of GDP—tiny but growing. The challenge: enabling transactions without gatekeepers while meeting compliance. Aave Arc's blockchain analytics seemed premature five years ago; banks now routinely request it. But "regulated DeFi" risks stripping away key benefits, including yield. The balance between DeFi innovation and TradFi compliance remains unresolved.

Key takeaways

• "The total value locked in all DeFi applications comprises about 4% of the total crypto market and significantly less than 1% of GDP. In other words, there's an acknowledgment that DeFi has great potential to bring new disruptive features to traditional payments and financial services, but there is also a very long road to go."

Sergey Nazarov, Co-Founder & CEO, Chainlink

Blockchain integration faces a critical 2-5 year transition where legacy financial systems must synchronize with fragmented on-chain infrastructure. The core challenge is meeting accounting, compliance, and regulatory requirements simultaneously through hybrid solutions. Regulated DeFi variants like Aave Horizon offer 8-15% yields with automated compliance, attracting institutional capital. Comprehensive proof systems for reserves, liabilities, and solvency enable market-driven risk assessment, where transparency allows better-secured assets to naturally capture more capital.

• As the cost of creating new chains decreases and competitive dynamics favor proprietary chains, the industry will see increasing fragmentation. This creates siloed capital and requires standardized cross-chain protocols to enable capital flow and market growth.

• For tokenized deposits, stablecoins, and real-world assets to gain institutional adoption, the market needs comprehensive transparency through proof of reserves, proof of liabilities, and proof of solvency, allowing participants to make informed risk decisions.

Jackie Reses, CEO, Lead Bank

The banking sector's crypto readiness crisis stems from knowledge gaps and execution capability, not technology, with only ~10 banks equipped for stablecoin operations at scale. Traditional institutions can't match crypto's development velocity, while consumer use cases remain impractical. The real opportunity lies in institutional infrastructure and multinational payments, where stablecoins compete with rails like FedNow on economic merit. Recent bank failures pushed crypto firms from libertarian ideals toward compliance-focused integration with traditional finance.

• The main obstacles to DeFi-TradFi integration aren't technical limitations but rather the knowledge gap in understanding blockchain products and the ability to execute with the velocity required in the digital asset space, where five engineers can sometimes accomplish more than 10,000.

• The industry has evolved from a libertarian "move fast and break things" mentality to understanding, especially after Signature and Silvergate failures, that they're dependent on the banking system and must meet compliance standards to operate successfully within it.

Michael Shaulov, CEO, Fireblocks

Blockchain custody fundamentally differs from traditional models by storing private keys rather than physical assets, with multi-party computation preventing single-point failures that plague legacy systems. The real integration challenge lies in operational tempo, banks requiring weeks for changes while blockchains demand 60-minute updates, and batch-processing infrastructure from the 70s-90s can't meet real-time requirements. Institutional DeFi adoption centers on digital-native fintechs like Stripe and Revolut accessing permissionless protocols through permission layers, secure APIs, and on-chain identity for compliance.

• The main challenge for institutions accessing DeFi is reconciling license obligations with permissionless protocols. This requires permission layers, secure APIs, whitelisting, and emerging on-chain identity solutions to ensure counterparties aren't sanctioned entities.

• Traditional banks running on systems built in the 70s-90s with batch processing and lengthy change management cycles cannot handle blockchain requirements like implementing protocol forks within 60 minutes or risk disconnection from the main ledger.

Jennifer Barker, Global Head of Treasury Services & Depositary Receipts, BNY

Financial transformation requires coexistence, not replacement, of traditional and blockchain systems through interconnected networks. Traditional providers deliver essential scale, regulatory standards, and expertise, while digital rails offer new efficiencies. The distinction matters: tokenized deposits optimize liquidity within institutional walls, while stablecoins enable cross-chain movement outside banks, both serving critical but different purposes. Industry standards like ISO 20022 and Swift integration are essential, yet 90+ global payment systems still lack formatting consistency.

• The transformation isn't about blockchain immediately replacing traditional systems but about the two coexisting and interconnecting. Success requires layering digital asset innovation onto proven financial infrastructure to unlock efficiency, liquidity, transparency, and security.

• Tokenized deposits represent cash inside the bank, optimizing liquidity and reducing settlement risk within institutional walls, while stablecoins operate as cash outside the bank, traversing multiple chains and systems, both are equally important for different use cases.

Panel 2: Stablecoin use cases and business models

Moderator: Kyle Samani, Co-Founder & Managing Partner, Multicoin Capital

Discussion centered on stablecoin adoption barriers, technical integration challenges, and interoperability gaps in DeFi. The focus highlighted that complex user experiences and unclear value propositions over existing payment rails remain critical obstacles requiring practical solutions.

• "I think most folks trying to get into the space don't appreciate the nuances of the complexity of the DeFi protocols and the on and off ramps and the wallets and making all those things work. It really is pretty difficult from a user experience perspective."

• "Great tech always lets you do old things better and some new things that you couldn't do before."

Charles Cascarilla, Co-Founder & CEO, Paxos

Stablecoin issuance favors partnerships over in-house development due to network effects and brand risk, with most banks ill-suited for direct issuance. The operational challenge of 24/7 blockchain systems interfacing with traditional banking hours requires significant abstraction of technical complexity. Tokenized Treasuries present future opportunities, while recent transparency around minting errors demonstrates blockchain's accountability advantages over opaque traditional systems.

• "I'd say DeFi and crypto is still not abstracted away enough where it's solving just the problem as opposed to requiring you to actually understand the underlying mechanics. To date myself, I kind of think back to trying to get on the internet, and it was like trying to get on when there was a thing called Freenet, and you had to like dial up and you put this receiver on a thing and you got some weird noises and you could get like a little line of text that would come down. By the way, like as absurd as that sounds, that's actually not that unusual when you kind of go through the DeFi ecosystem."

• "If you really kind of look at the dollar on a first principles basis, it's basically a wrapper, you know. It's kind of a wrapper today for government securities, maybe some gold, some other things that are on the Fed balance sheet. And essentially a stablecoin is an even smaller subset of what the dollar is. It's basically only cash and cash equivalents, only T-bills, only overnight repo and some bank cash."

Tim Spence, Co-Founder & CEO, Fifth Third Bank

Industry-wide stablecoin standardization outweighs proliferation of individual bank tokens, with cross-border payments emerging as the primary viable use case. Programmability features must deliver substantial performance advantages over existing rails to justify adoption. The concept of "ScaledFi" represents evolved traditional finance rather than complete replacement. Interest-bearing stablecoins pose systemic deposit drain risks to the banking sector.

• "One of the rules that we use at Fifth Third is don't unsolve solved problems. I was listening to the discussions about interoperability and discounts and otherwise, and I couldn't help but think back to Thompson's Banknote Guide, which at least the folks from the Federal Reserve will remember existed in the US during the free banking era prior to the presence of the Federal Reserve, where individual banks had to figure out how to discount notes that were issued by other people. And I think the end outcome there, the conclusion there, was that we were better off with a single currency that was valued at par and it would facilitate commerce."

• "There's a lot you can do with programmability that is technically better than people using bill pay services to schedule a payment, right? But it has to be much better in order for people to change the behavior. Like the law of good enough works against any new technology, because if the existing method works well and it doesn't cost much, and especially on the consumer side of the equation, most payment initiation is free in the US, you have to be able to demonstrate some significantly better value."

Fernando Terres, Co-Founder & CEO, DolarApp

Stablecoin use cases vary by Latin American country: store of value and transactional. Customer base is mass affluent, not bottom of pyramid. Product complexity must be hidden from users. Interoperability manageable with liquidity buffers.

• "The use cases are pretty different country by country. In some cases are more around the store of value idea, so imagine you're a Colombian person, you want to dollarize your savings. But there's also elements on the transactional side. So imagine you're a Mexican person living close to the border and you'd like to travel with your family to the US, right, and you want to be able to spend internationally. Or also if you're a backend engineer living in Buenos Aires and you want to work for a company in Europe in the US and receive your payroll."

• "The way we try to run the company is having these pools of capital, sometimes in fiat, sometimes in blockchain, to be able to bridge the world so that we as product people swallow the complexity so we can give the customers the simplicity and the benefits without them having to go through the complexity."

Heath Tarbert, President, Circle

Two stablecoin challenges: trust/compliance (solved by GENIUS Act) and utility/liquidity (needs banking rails and cross-chain capability). Enterprise use cases in trade finance and treasury. Payment stablecoins must stay separate from yield-bearing instruments. Fed accounts may be needed for systemically important issuers.

• "At a high level, when I think about frictions and sort of what are the things that are barriers to stablecoin use case, I'd say there really two big buckets. The first is: is the thing trusted, compliant and transparent? In other words, do I need the Thompson's Bank Note Guide or something like it to know whether or not I'm actually gonna get my dollar back? I think the GENIUS Act largely solves that problem, particularly as it's implemented, because all stablecoins aren't equal and all stablecoins aren't stable."

• "We're gonna get to a point where stablecoins themselves are just floating around like any other form of electronic money, like credit cards, debit cards, most of which, by the way, are not legal tender. I'm often overseas, I'm talking, just let's say a Korean manufacturer who wants to sell goods overseas to Latin America. It takes five days for the money to move and sometimes is extremely costly. So you can imagine a scenario where all of this is built in and the moment the goods leave the factory floor, through smart contract technology and programmability, the money is automatically sent or when it's received on the other end."

Panel 3: AI in payments

Moderator: Matt Marcus, Co-founder and CEO, Modern Treasury

Multiple payment rails are emerging to support agentic commerce, each with distinct standards and capabilities. Productivity gains from AI often manifest in margins, wages, and R&D rather than top-line revenue. Real-time payment schemes like FedNow are evolving to encode richer information and support request-for-pay standards that could enable new agentic commerce experiences.

• "I think so much of the benefits are coming in productivity gains, and that doesn't show up on the top line. It can be turned into margins, increased wages, increased R&D or lower prices."

• "We've been doing quite a bit of work on FedNow in the real-time payment schemes at Modern Treasury. I think even there too, when we think about agentic commerce, there's potential as those rails progress around the information that's encoded in the payment rails, the request-for-pay standard potentially coming into some of these experiences, opening up other payment methods for the agents."

Cathie Wood, Founder and CIO, Ark Invest

AI and blockchain innovation are poised to drive global real GDP growth to 7%+ over the next five years through unprecedented productivity gains. Unlike historical infrastructure investments with physical limits, intelligence and imagination have no ceiling. Current AI investment levels are justified and not a bubble, with technology historically proving to be a net job creator despite displacement concerns.

• "We believe that with the breakthroughs like this one and the productivity gains, because that's really what you're talking about, that are being unlocked here, that real GDP growth in the next five years will accelerate to 7% plus. That's a global number I'm talking about as well."

• "The history of technology is it is a net job creator. Sure, there's displacement, but boy, talk about the best time this could happen. Baby boomers, I think, are retiring, 1.3 million per year."

Alesia Haas, CFO, Coinbase

Stablecoins have surpassed $300 billion in market cap, with open infrastructure versions gaining dominance due to interoperability and deep liquidity. Regulatory clarity through the GENIUS Act is catalyzing institutional adoption, while blockchain scaling enables thousands of transactions per second with superior operational efficiency, crypto reconciliation requires one person half a day versus 15 people for three days with traditional fiat.

• "Stablecoins have crossed $300 billion of market cap, and the two that have been adopted importantly are open infrastructure stablecoins. They are interoperable, they have deep liquidity, they were built on permissionless networks, and I think that's a really important data point around what we're seeing customers adopt."

• "Stablecoins, we think, are uniquely suited to micropayments. It's really hard to do a 2-cent payment through any other payment vehicle that we have. It's cost-prohibitive, quite candidly. It's not cost-prohibitive in a stablecoin."

Emily Sands, Head of Data & AI, Stripe

Agentic commerce represents AI's evolution from knowing to doing, requiring new payment infrastructure to handle multi-party fraud risks and enable seamless transactions. AI companies are reaching $30 million ARR in 18 months, four times faster than previous SaaS cohorts, while adopting usage-based and outcome-based monetization models. Stripe's Agentic Commerce Protocol and Shared Payment Token address the need for standardized product communication and secure credential tokenization.

• "Agentic commerce is actually a spectrum, but I think of it as an agent facilitating a transaction between a buyer (whether a consumer or a business) and a seller."

• "These AI companies on average get to $30 million ARR in just 18 months. If you want to benchmark that with the 2018 cohort of equally promising top 100 SaaS companies, that's like 3-4 times as fast."

Richard Widmann, Head of Strategy, Web3, Google Cloud

Agentic workflows will accelerate machine-to-machine and human-to-digital interactions, with blockchain protocols providing critical auditability that traditional payment rails lack. Google's Universal Ledger and the Agentic Payments Protocol (AP2) with X-402 standard enable micropayments and API-level commerce. Success requires build-buy-partner strategies rather than going it alone, with stablecoins emerging as optimal payment forms for agents that cannot open traditional bank accounts.

• "Our view is that it will accelerate, in many ways, the proliferation of apps that contemplate what we'll call agentic workflows or machine-to-machine interactions. But it will also optimize what I would consider to be human-to-digital interactions or human-to-web interactions in a way that perhaps is probably a little bit more real for folks in this audience as opposed to the developer ecosystem."

• "People who are trying to kind of go it alone, I find that they struggle the most. Maybe it's a build-buy-partner decision, but that's generally been our point of view: there are things that we can do well and we'll be opinionated about. AI is one of those things. There are things where we know we have partners in our ecosystem where they're the subject matter experts, and doing a 1+1=3 situation is actually better than us just trying to do that ourselves."

Panel 4: Tokenized products

Moderator: Colleen Sullivan (Brevan Howard Digital)

Tokenization represents a gradual two-way merger between traditional finance and crypto, where digital assets become collateral in traditional markets while traditional assets move on-chain. Sullivan probes critical questions around fungibility of tokenized money products, collateral standards for institutional clearing, risks of traditional assets entering DeFi ecosystems, and the Federal Reserve's potential role in establishing frameworks as markets accelerate toward an on-chain future state.

• "Digital assets like stablecoins, tokenized commercial bank deposits, tokenized US Treasury money market funds, and all forms of crypto like Bitcoin, Ethereum, and Solana will trade and be used as good collateral in our traditional markets."

• "I think it's really important that we think about what is good collateral. What do we want coming into our traditional markets, and how do we haircut that?"

• "How careful we have to be about deploying securities into these sorts of ecosystems where perhaps those risks are not fully understood or assessed at this point."

Jenny Johnson, CEO, Franklin Templeton

Blockchain as a programming language excels at creating one source of truth, executing atomic settlement through smart contracts, and providing integrated payment mechanisms that eliminate reconciliation costs. Johnson emphasizes that Franklin Templeton's natively on-chain money market fund enables second-by-second yield calculation, $20 minimums versus $500, and 24/7 trading, while technology adoption always appears slower before suddenly accelerating as disparate projects connect and reach an inflection point.

• "We're just talking about a programming language, right? It does some really cool things that make it better than some of the traditional rails."

• "Franklin's money market fund is natively on-chain, so we literally calculate every second a yield and we pay it every day in the account, so you actually see it."

• "Technology adoption is always slower, and then it just takes off, and you can't imagine 10 years. That's what's going to happen here."

Don Wilson, Founder & CEO, DRW

Every frequently traded instrument will be on-chain within five years as 24/7 markets necessitate real-time collateral management using tokenized assets with atomic settlement. Wilson advocates for the Fed to establish principles for collateral haircuts based on credit quality, liquidity, convertibility, and transparency, while criticizing conflicts of interest where exchanges provide liquidation liquidity and calling for robust oracle regulation following the October flash crash that exposed systemic vulnerabilities.

• "In five years from now, every instrument that is traded frequently will be traded on-chain. That is my prediction."

• "We shouldn't have to wait for the monthly audit to see where the stablecoin reserves are invested, we should be able to see in real time where those are."

• "This statement that 'hey, this is just a programming language' misses what happens when you take a so-called real-world asset and you put it on-chain."

Rob Goldstein, COO, BlackRock

Tokenization remains nascent despite Bitcoin's massive transaction volume, requiring hybrid bridging solutions and trusted intermediaries to avoid structured product risks while building more rigorous AML/KYC frameworks from the ground up. Goldstein stresses that wealth accumulation in digital wallets, including from AI company liquidity events, will inevitably demand access to complete on-chain portfolios including traditional instruments, making the question "when" not "if."

• "This hasn't even started yet. Global equity market cap is $120 trillion something like that."

• "A lot of what people are calling tokens are wrapped in such a way that they're really more like a structured product."

• "This is a unique time where you could build with no legacy in a way that should have a more rigorous AML/KYC framework."

Kara Kennedy, Co-head, JPM Kinexys

Tokenized products must preserve identical legal rights and entitlements as underlying traditional positions through proper custodial frameworks and regulatory oversight to achieve institutional adoption at scale. Kennedy highlights JPM Kinexys's solutions including minute-timed repo with tokenized Treasuries and deposit tokens on Base, while emphasizing that actors in tokenized securities markets must meet the same standards as traditional broker-dealers and exchanges to protect investor confidence.

• "The token product needs to have the same legal rights and entitlements as the holder would have in the underlying traditional position."

• "The AML/KYC requirements that we're rightly subject to, that's a non-negotiable, particularly for institutional players."

• "We know enough from the experiences of the traditional world that we don't need to make those mistakes in terms of the experimenting in the space. We need to make sure we go in with the right approach from the start."

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