US Federal Reserve To Tackle “Unregulated” Stablecoins with New Team
The US Federal Reserve (Fed) has announced plans to create a new “specialized team of experts” to tackle the menace of “unregulated” stablecoins. The central bank’s Vice Chair for Supervision, Michael Barr stated this on March 9 during an event at the Peterson Institute for International Economics in Washington.
Although he admits that crypto technology could have positive impacts on the financial system, he claims this can only become a reality with proper regulation. This is coming on the heels of concerns arising from the Fed on stablecoins which do not have the strong regulatory watch they need, but are so widely used.
The new team will have its hands on the pulse of developments in the crypto space and ensure that the Fed is up-to-date on innovations in the industry to ensure proper regulatory monitoring. While Barr admits the importance of regulation, he also cautions that regulation must not be so tight as to kill crypto innovation.
Insecurity With Stablecoins
One major concern that Barr mentioned was the illiquid nature of the assets backing most stablecoins. He said this can cause major losses to users because they may not be able to readily liquidate them when they need to. Barr therefore encourages the regulation of such stablecoins by the government to ensure that households, businesses, and the economy don’t suffer damages.
He also stated that stablecoin decentralization is overrated and there are new centralized “intermediaries that are either not subject to, or not compliant with appropriate regulation and supervision”. The former RIpple adviser added that banks should be involved with crypto innovation at the developmental stage to be fully aware of the emergence of new technologies.
US Catching Up in Crypto Regulation
The US has hitherto been on the fence in terms of crypto regulation. The industry has until now been operating without any clear regulatory guidelines, making it difficult for crypto startups to thrive. The Fed however seems to be up and doing now trying to bring regulation to crypto as other countries do same.
The central bank has rolled out several guidance and policy updates on digital assets in the last few months. A similar trend is seen with the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency. According to Barr, more of such regulatory updates will be rolled out on an ongoing basis.
He adds that ““There’s a critical role for Congress to play right now in establishing a framework for stablecoins.” If clear regulations are put in place for stablecoins (which are the most widely used crypto assets because of their relative stability) the industry may finally earn the confidence of both the US government and the public which should be a win overall.
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