Fed Vice President of Supervision Michael Barr says that crypto assets are “unlikely to become substitutes for money” because they have proven highly volatile and pose “novel” risks.
Barr was speaking at the annual fintech ecosystem talks workshop at Washington, DC Fintech Week, where he said the idea that he could use them to pay for transactions was unlikely. However, he gave mild praise to stablecoins, saying they have a “greater ability to function as privately issued money.”
Stablecoins can be pegged to a currency or commodity, such as gold, although most currency-pegged coins are pegged to the dollar, such as Tether, the world’s largest stablecoin, with a market capitalization of over $68 billion at the time of this writing.
Barr added that he believed stablecoins “present specific and well-understood risks similar to other types of money-like assets,” though he cautioned, “History has shown that money-like assets are subject to runs that can threaten stability.” financial.”
The Fed is especially interested in stablecoins that are pegged to the US currency, Barr said, though he did not name any specifically.
The news comes a day after cryptocurrency exchange Bittrex paid a whopping $53 million to settle claims by the US Treasury’s Office of Foreign Assets Control and its Financial Crimes Enforcement Network that the platform violated US sanctions, federal money laundering laws, and other banking rules.
The exchange is alleged to have done business with netizens in Cuba, Sudan, Syria, Iran and Crimea, which would have violated US sanctions.
Trust in central banks
Barr echoed comments by Fed Chairman Jerome Powell earlier this month that a central bank will always be the primary source of trust behind money, though we noted Powell at the time was speaking in a round table of other central bank leaders who are concerned. on decentralized finance at a conference organized by the central bank of France, Banque de France.
Barr noted that stablecoins borrow the trust given to central banks, so regulators were especially interested in establishing a robust federal framework for their use.
Google Cloud this week joined the leagues of those who accept cryptocoin, although the payment method will only be available to a select few initially.
Barr, whose job it is to oversee how the Federal Reserve supervises and regulates banks and other types of finance and fintech, didn’t mention the green demands on all crypto assets, whether they’re stablecoins or more volatile cryptocurrencies like bitcoin, which they use the energy-intensive blockchain as a consensus mechanism.
Netscape developer Jamie Zawinski said Register in January that “there was literally nothing in the modern tech ecosystem more myopic,” calling crypto an “ecological disaster” whose main effect was the incineration of the planet.
But just a month after a central bank had to work to protect a country from real market collapse after the UK released a mini-budget that sent its government debt into a free fall, we think it’s fair to say that crypto fans and fintechers alike should sit back. Get up and pay some attention. ®