Vice Chairman of the Federal Reserve System Michael Barr said on Wednesday that the Fed is collaborating with the OCC and the FDIC to oversee the crypto asset industry.
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In addition, Michael Barr discussed the need for rules surrounding stablecoins, the dangers of tokenizing bank obligations, the growth of consumer independence, the FedNow Service digital payment system, and CBDC.
Michael Barr Suggests New Cryptocurrency Rules
Michael Barr, speaking at D.C. Fintech Week on October 12, said the Federal Reserve Board, in conjunction with the OCC and FDIC, intends to tighten regulation and supervision of banks’ involvement in crypto-asset transactions. It will guarantee that financial institutions take care of potential dangers and offer crypto services that safeguard clients and the economy as a whole.
Moreover, the hazards and interconnections in the crypto market were exposed by the recent market crisis. Banks face risks from such occurrences, including volatility in deposits, insurance for deposits from crypto-asset firms, and other liquidity issues. In the next months, the banking sector should expect instructions from the regulators on how to best manage the risks.
Crypto assets are not likely to replace money and take over as the primary payment method, according to Michael Barr. The Federal Reserve, on the other hand, thinks that stablecoins pegged to the dollar might serve as privately issued money. Since their use is expected to grow, the Fed is collaborating with other agencies to establish a regulatory framework for stablecoins.
Financial institutions issuing tokens based in US dollars over distributed ledgers must consult with authorities to assess the merits and drawbacks of this novel application. Financial institutions also have a responsibility to verify that their offered services are in accordance with applicable regulations.
Michael Barr has introduced the FedNow Service, a digital payments platform for instant, safe, and low-cost money transfers. By July of 2019, the Fed expects to have their FedNow service up and running.
On the other hand, the Fed has not yet opted to issue a CBDC or otherwise prioritise work on crypto laws. Before committing to launching Digital Dollar, the U.S. may decide to observe the success of CBDCs in other countries.
The Crypto Community Urges Legislation
It has been argued by prominent figures in the cryptocurrency sector that the United States must implement its own unique crypto rules. It will prevent regulators from going overboard with crypto regulations and aid increase crypto usage. Michael Sonnenshein, CEO of Grayscale, believes lawmakers need to settle the dispute between the CFTC and the SEC on crypto jurisdiction. Moreover, it could convince the SEC to green light a spot Bitcoin ETF.
Charles Hoskinson, creator of Cardano, thinks Congress in the United States should move quickly to establish crypto laws and resolve concerns amongst regulators.
Source: Google Trend