Tue. Sep 27th, 2022

Two U.S. Federal Reserve officials have called for new regulations specifically for stablecoins and reiterated the new asset class holds risks similar to traditional finance.

See related article: Financial Stability Board calls for high regulatory standards for stablecoins

Fast facts

  • Michael Barr, the Fed’s vice chair for supervision, said on Wednesday at a Brookings Institution event in Washington, D.C. that stablecoins, like other unregulated private money, could pose financial stability risks.
  • “I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter,” Barr said.
  • Meanwhile, Fed Vice Chair Lael Brainard said on Wednesday in a speech at a conference organized by The Clearing House and Bank Policy Institute that the crypto financial system “has all the same risks that we’re very familiar with from traditional finance,” CoinDesk reported.
  • Brainard added stablecoins are one of the areas that have the most potential for risks if not properly regulated and such risks could spill into the main core financial system.
  • Brainard also said the Fed is committed to its campaign of rising interest rates to tackle inflation but the central bank will be data dependent and remain conscious of over-tightening.
  • In November 2021, the U.S. President’s Working Group on Financial Markets published a report on stablecoins, urging the Congress to act quickly to enact relevant legislation.
  • U.S. Treasury Secretary Janet Yellen has repeatedly said that it’s “highly appropriate” to have a stablecoin regulatory framework ready by the end of this year.

See related article: Binance move to remove USDC and others raise questions about market conduct

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