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The Fed’s Vice Chair for Supervision emphasized that they bash not privation to curb innovation, but guarantee that regulations support households and the fiscal system.
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The United States Federal Reserve is acceptable to make a “specialized squad of experts” to support up with developments successful the cryptocurrency industry, according to a Fed official, amid concerns from the Fed of “unregulated” stablecoins.
Speaking astatine the Peterson Institute for International Economics successful Washington connected Mar. 9, Vice Chair for Supervision Michael Barr admitted that crypto could person a “transformative effect” connected the fiscal system, but added that “the benefits of innovation tin lone beryllium realized if due guardrails are successful place.”
According to Barr, the caller crypto squad volition assistance the Federal Reserve “learn from caller developments and marque definite we’re up to day connected innovation successful this sector,” adding:
“Innovation ever comes quickly, but it takes clip for consumers to go alert that they could some summation and suffer wealth connected caller fiscal products.”Meanwhile, Barr noted that regularisation needs to beryllium a “deliberative process” to guarantee a equilibrium is reached betwixt over-regulation which “will stifle innovation” and under-regulation which “will let for important harm to households and the fiscal system”
One subsect of crypto that Barr highlighted arsenic a constituent of interest was stablecoins.
He suggested that the assets backing galore stablecoins successful circulation are illiquid, meaning that it tin beryllium hard to liquidate them for currency erstwhile needed, arguing:
“This mismatch successful worth and liquidity is the look for a classical slope run.”He believes that unless regulated by the Fed, immoderate wide adoption of stablecoins could enactment households, businesses, and the broader system astatine risk.
Caitlin Long, the CEO of Custodia Bank — which has consistently been rejected from joining the Federal Reserve System — pointed retired the irony successful the comments from Barr fixed her content that Silvergate Bank collapsed owed to liquidity issues arising from a slope run.
UM, WASN'T THE FED #Silvergate's REGULATOR?♀️
"The banks we regulate, successful contrast, are good protected from slope runs thru a robust array of supervisory requirements."--Fed Vice Chair Supervision Michael Barr, speaking this morning(!)
h/t @ByKyleCampbellhttps://t.co/7UsHDKfiaC
Long besides pointed to the existent issues facing Silicon Valley Bank, whose shares plummeted aft a Mar. 8 fiscal update disclosed that it sold $21 cardinal worthy of its holdings at a $1.8 cardinal loss, prompting fears that it was forced to merchantability to escaped up capital.
FRIENDLY REMINDER that, close arsenic the panic was happening successful Silicon Valley, the Fed’s Vice Chair for Supervision Barr said successful a speech: "The banks we regulate, successful contrast, are good protected from slope runs thru a robust array of supervisory requirements."https://t.co/FpPl2Qlk7x
— Caitlin Long ⚡️ (@CaitlinLong_) March 10, 2023
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