Michael Barr says crypto could have a “transformative effect” on the financial system.
The US Federal Reserve wants to create a “specialized team of experts” to help supervise the crypto sector amid the rising regulatory concerns.
On March 9th, the Vice Chair for Supervision, Michael Barr, said that the new task force is set to help the Federal Reserve keep up with the development in the crypto industry.
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Speaking at an event for the Peterson Institute for International Economics in Washington, Barr said:
Despite recent events, we have not lost sight of the potential transformative effect that these technologies could have on our financial system.
Barr acknowledged the potential of cryptocurrency to transform the financial sector. However, he argued that the benefits of cryptocurrency can only be realized when there are appropriate regulatory frameworks to protect the financial system and households.
Innovation always comes quickly, but it takes time for consumers to become aware that they could both gain and lose money on new financial products.
According to the Fed’s vice chair, the new team would help deal with the novel risk that may arise within the crypto space.
Michael Barr also addressed concerns about stablecoins. The Fed’s vice chair describes stablecoins as “unregulated private money,” highly exposed to “run risk”. The vice chair argued that the wide adoption of stablecoins may significantly disrupt financial institutions and people who might rely on digital assets.
Barr called the legislature to create a regulatory framework for these novel assets.
There’s a critical role for Congress to play right now in establishing a framework for stablecoins.
The Fed also warned the small banks that are getting deeply involved with crypto activities that they are exposing themselves to other correlated risks.
