The United States Federal Reserve is forming a specialized team of experts to monitor developments in the cryptocurrency space, as a Fed official recently confirmed. This is due to the Fed’s concern over the potential risk of unregulated stablecoins.
The Stance on Crypto from Vice Chair for Supervision
At the Peterson Institute for International Economics in Washington on Mar. 9, Vice Chair for Supervision Michael Barr acknowledged the potential for cryptos to revolutionize the finance sector. However, he also mentioned that the advantages of innovation can only be reaped when appropriate safeguards are implemented.
The Federal Reserve will benefit from the implementation of a new crypto team, as per Barr’s statement, allowing them to stay on top of the emerging developments and innovations in the sector. According to Barr, regulations should be approached in a thoughtful manner to ensure a perfect balance between excessive regulation that may inhibit innovation and insufficient regulation that could result in harm to common households and the financial system.
Stablecoins are a subsector of crypto that has been identified as a potential point of concern by the Attorney General. In particular, there are many businesses that are backed by these crypto assets that may be illiquid, making it hard to convert them into cash when necessary. Mr. Barr believes that unless regulated by the Federal Reserve, the extensive adoption of these coins could put households, businesses, and the wider economy in jeopardy.
Remarks from the CEO of Custodia Bank
https://twitter.com/CaitlinLong_/status/1633854894141480961?t=kEqhFAb3tlYIjJpcciAtLw&s=19
Caitlin Long, CEO of Custodia Bank – which has been repeatedly denied access to the Federal Reserve System – highlighted the irony of Barr’s remarks, considering her belief that Silvergate Bank had encountered liquidity problems as a result of a bank run. Silicon Valley Bank has recently seen its shares fall sharply following a financial update on Mar. 8, revealing that it had to offload $21 billion of its holdings at a significant loss of $1.8 billion. This news has caused some concerns, as it was forced to take such action to free up capital.
https://twitter.com/CaitlinLong_/status/1634026946249232384?t=-9vAhdLtleaY4QLfyC5uFQ&s=19
