2022-9-16 17:52 |
Michel S. Barr, the Fed Vice Chair for Supervision, says that the regulation and oversight of stablecoins and other private money, if unregulated, could pose financial stability risks to the US economy. “History shows that in the absence of appropriate regulation, private money is subject to destabilizing runs, financial instability, and the potential for widespread economic harm”, Barr said.
Barr spoke at the Brookings Institution, Washington, D.C., on September 7, 2022, on the topic: ”Making the Financial System Safer and Fairer”. He emphasised the importance of speedy regulation in the crypto space. “I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter”, Barr said.
Barr expressed concern over the risks of innovative financial products like crypto assets to customers and the financial system. ”Crypto-asset related activity, both outside and inside supervised banks, requires oversight so that people are fully aware of the risks they face”, he said.
“Banks engaged in crypto-related activities need to have appropriate measures in place to manage novel risks associated with those activities and to ensure compliance with all relevant laws, including those related to money laundering, ” Barr said.
A similar call was made in an August 2022 Fed press release that advised banking institutions to ensure that they have adequate risk management systems before engaging in crypto-related business activities.
Barr emphasised collaboration with other agencies in promoting a safe and sound financial system. “We plan to work with other bank regulatory agencies to ensure that crypto activity inside banks is well regulated, based on the principle of the same risk, same activity, same regulation, regardless of the technology used for the activity”, he said.
“I plan to make sure that the crypto activity of banks that we supervise is subject to the necessary safeguards that protect the safety of the banking system as well as bank customers”, Barr further said.
Barr acknowledged the need for instant digital payments and support for the “FedNow Service” that will enable financial institutions across America to provide instant payment services to their customers when launched.
Regulator interest in ensuring a safer and fairer financial system is growing as the public and institutions seek to engage in crypto-related business activities.
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