Federal Reserve to Establish a New Crypto Team
An official from the United States Federal Reserve has announced plans to establish a specialized team of experts to stay abreast of advancements in the cryptocurrency industry, as the central bank is worried about unregulated stablecoins.
During a speech at the Peterson Institute for International Economics in Washington, Michael Barr, the Vice Chair for Supervision, acknowledged the potential transformative impact of crypto on the financial system, but stressed the need for appropriate guardrails. Barr explained that the new crypto team will help the Federal Reserve keep up with developments and remain up to date with innovation in the sector.
He also emphasized that regulation must be a deliberate process to strike a balance between over-regulation that stifles innovation and under-regulation that causes significant harm to households and the financial system. Barr warned that innovation often happens rapidly, but it takes time for consumers to comprehend the potential risks and benefits of new financial products.
During his speech, Barr expressed concern about stablecoins, a subset of the cryptocurrency industry. He explained that the assets supporting many stablecoins in circulation lack liquidity, making it challenging to convert them into cash as needed. He warned that this mismatch in value and liquidity could lead to a traditional bank run.
Barr argued that the widespread adoption of stablecoins without proper regulation by the Fed could jeopardize households, businesses, and the economy. In response to Barr's remarks, Caitlin Long, the CEO of Custodia Bank, which has repeatedly been denied entry into the Federal Reserve System, pointed out the irony of his comments. She believes that Silvergate Bank's collapse was due to liquidity problems stemming from a bank run.
Sources:
https://biz.crast.net/us-fed-to-form-new-crypto-team-amid-concerns-about-unregulated-stablecoins/
https://ambcrypto.com/u-s-fed-to-create-new-crypto-team-amid-stablecoins-concerns/