The Vice Chairman of the US Federal Reserve, Michael Barr, has said the Reserve is collaborating to regulate crypto activities. He said the Reserve works with the Federal Deposit Insurance Corporation. It also works with the Office of the Controller of the Currency.
Michael Barr spoke at the Fintech Week in D.C on the 12th of October. He said the board of the Federal Reserve looks to strengthen crypto supervision and regulation. They are actively working with the FDIC and OCC.
Barr said the collaboration will make sure that banks properly manage risks. The banks will also offer crypto services to protect their customers. They would also be compelled to protect the financial system.
Barr believes the latest crypto crash reveals the risks associated with the market. It also reveals the interconnectedness of the financial markets. Such events would create risks like deposit fluctuation for banks.
Other aspects that could carry risk include crypto firms’ deposit insurance. Other liquidities also have the same risk potential. The regulators will give the operating guidelines to banks in a few months.
Banks Need to Corporate
Barr also believes that crypto is likely to become the substitute for money and gain dominance. But he said stablecoins pegged to the Dollar might become private money. The Feds are, therefore, working with other regulators to create a regulatory framework before adoption spreads.
Banks that offer tokens denominated in Dollars must work with regulators. They have to reveal the advantages and risks of the use case. Banks must also make sure the services stay compliant with relevant laws.
Barr went further to reveal the FedNow Service as a digital payment platform. It is said to enable secure, real-time, and cost-effective money transfers. Feds are working to launch the platform by July 2023.
But the central bank has not concluded on issuing a CBDC. It rather prioritizes finalizing works on cryptocurrency regulation. The US might want to consider how CBDCs work in other countries before hopping on it.
Leaders in the crypto industry say it is important for the US to make good crypto laws. It is expected to boost the adoption and prevent over-regulation of the sector. Grayscale’s CEO believes lawmakers need to resolve the conflict between the SEC and CFTC.
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