Nacha, which oversees the largest US automated payment system, is warning the Federal Reserve to slow down any plans to implement a central bank digital currency, with a phased approach to implementation.

That’s the message Nacha delivered in a May 11 comment letter submitted after the Fed produced a report earlier this year providing a general overview of what a central bank digital currency (CBDC) might look like. and the issues it might raise. While the deadline for the letters was due in May, Nacha’s contribution was part of a trove of submissions that have not been widely reported.

Some central banks around the world have already launched CBDCs or are using them in pilot projects, including China. Many more are considering the possibility, according to the Atlantic Council. The issue is of particular importance to the United States, as it seeks to maintain the dollar’s status as the world’s reserve currency.

Nacha, formerly known as the National Automated Clearinghouse Association, oversees the ACH network and works closely with government regulators at the Fed, Treasury Department, and state banking agencies. Any potential CBDC, also known as a digital dollar, would be an important addition to all payments and banking systems. That’s part of the reason Nacha is urging the Fed to slow down.

“A CBDC has the potential to disrupt consumer and business payments and deposit-based lending in fundamental and profound ways,” Nacha said in her letter written by William Sullivan, Senior Director and Group Head of Relationships. with government and industry. “To mitigate the negative impacts of such disruption, but recognizing the broad desire to modernize existing payment systems by expanding interbank settlement capabilities, Nacha suggests a phased approach to introducing a CBDC.”

Nacha provided a prescription for what this phased approach might look like, recommending that a CBDC be used initially only to settle interbank payments, operating alongside existing parts of the US payments infrastructure, including the National Settlement Service. , the Fedwire Funds Service and the soon-to-launch FedNow real-time payment system.

“CBDC’s role could evolve into a primary settlement mechanism and liquidity management tool as confidence in its use grows,” Sullivan’s letter said.

Nacha hit out at the Fed in the letter for apparently rushing the CBDC when it failed to complete other aspects of a 2015 plan titled Strategies to Improve the U.S. Payments System Report. For example, the Fed has not attempted to upgrade the NSS to operate 24 hours a day, so it always closes at night as well as weekends and holidays (last year , opening hours have been extended by one hour), the letter is noted.

“To the extent that the Fed is prioritizing a CBDC, this should not come at the expense of further improvements to existing interbank settlement services,” the three-page letter states.

If the Fed were to proceed with setting up a CBDC solely for the purpose of settling interbank transfers, it could determine whether a digital dollar was viable in a finite community of regulated users; complement existing settlement services in a way that furthers the Fed’s long-standing goals; enable the United States to exploit the technological advantages of a digital currency; and avoid direct competition with stablecoins being developed in the private sector, the letter states.

Nacha’s measured response was more favorable than that of the private banking sector, which largely rejected the idea of ​​proceeding with a digital dollar. In their own comments, US banks and banking trade groups focused on the risks a CBDC would pose and the potential harm it could cause to the existing financial system. Payments companies were more mixed in their response, focusing on questions left open by the Fed’s January report on the potential for a CBDC.

The Fed, which is now weighing some 2,000 public comments, did not take a position in its report on whether or not to pursue a CBDC.