NEW YORK (Reuters) -Federal Reserve Governor Christopher Waller said on Tuesday that he believes the private sector should take the lead when it comes to payment sector innovations.

"I hold the view that it is generally the private sector that can most reliably and efficiently provide goods and services to the economy. And I apply this view to the payments ecosystem," Waller said in remarks to the Clearing House Annual Conference 2024 in New York.

"What is the fundamental market inefficiency that would be solved by government intervention and can only be solved by government intervention?" Waller asked, noting that "if there isn't a satisfactory answer, then I believe government shouldn't intervene in private markets."

Waller did not comment on the monetary policy and economic outlook in his prepared remarks, which centered on the role the Fed plays in the payment system.

He said the U.S. central bank "stands ready" to help the payment system evolve "primarily through our operational role in the payment system, by providing core clearing and settlement infrastructure on which the private sector can innovate."

Waller said that role is consistent with what the central bank is doing with FedNow, its real-time payment system.

He also said one key role the Fed can play is to bolster private sector efforts to link financial institutions in a "decentralized and diverse" banking system.

The Fed governor also continued to express skepticism over a Fed digital dollar, or central bank digital currency. "What market failure or inefficiency demands this specific intervention? In more than three years, I have yet to hear a satisfactory answer as applied to CBDC," he said.

Waller also said in his remarks that stablecoins are effectively "synthetic" dollars that can bring benefits to the financial system.

These assets "could have a lot of potential benefits" and "eliminate" inefficiencies in the financial system, Waller said. He added that legislation is needed to deal with safety issues as these types of assets are vulnerable to runs that could destabilize the financial system.