Vice Chairman of the U.S. Federal Reserve Michael Barr recently announced that the Fed is working with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to regulate and supervise crypto asset activities. Michael Barr also highlighted stablecoin regulation, risks in the tokenization of bank liabilities, user autonomy, FedNow Services digital payment system and CBDC.
In Fintech D.C. speech. on October 12, Michael Barr said the Federal Reserve Board, along with the OCC and FDIC, is working to strengthen regulation and oversight of crypto asset activities. The Fed will ensure banks manage risk and provide crypto services that protect customers and the financial system.
Furthermore, the recent crypto market crash exposed the risks and interconnectedness in the crypto market. Events like this have potential risks for banks such as deposit volatility, deposit insurance by crypto asset companies and other liquidity risks. The regulator will provide guidance to the banking sector in the coming months to effectively manage these risks.
Michael Barr believes cryptoassets are unlikely to be a substitute for money and the dominant method for payment. However, the Fed sees stablecoins pegged to the U.S. dollar. may function as privately issued money. Therefore, the Fed is working with other regulators to introduce a regulatory framework for stablecoins before their use increases.
Banks offering dollar-denominated tokens on distributed ledger networks must align with regulators to discuss the risks and benefits of new use cases. In addition, the bank must ensure that the service complies with banking and related laws.
Meanwhile, the Fed is still undecided on whether to issue a CBDC and is prioritizing work on crypto regulation.U.S. may look at the performance of other countries' CBDCs before believing in launching a Digital Dollar.
