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US Fed to Establish Dedicated Team in Response to Unregulated Stablecoin Concerns

10 March 2023
in Latest News, News
Reading Time: 3 mins read
104 4
Home News Latest News

Last updated on April 23rd, 2024 at 09:25 am

In response to concerns about unregulated stablecoins, the U.S. Federal Reserve plans to create a team of specialists to track developments in the cryptocurrency industry.

Michael Barr, Vice Chair for Supervision at the agency, announced the plan during a speech at the Peterson Institute for International Economics in Washington, D.C., on March 9, 2023.

Video on Michael S. Barr’s Take on Crypto Activities

During his speech, Barr admitted that cryptocurrencies could significantly impact the financial system but emphasized that the benefits of such innovations can only be realized with appropriate regulatory measures. 

Barr stated: 

“Despite recent events, we have not lost sight of the potential transformative effect that these technologies could have on our financial system.”

Barr claimed that the new crypto team would assist the Federal Reserve in learning from recent advancements and ensuring they are up-to-date with innovations in the crypto industry. Innovation, according to Barr, always happens rapidly,  but it often takes some time for consumers to recognize the potential risks and rewards of new financial products.

Barr emphasized the importance of a deliberative process in regulation in order to strike a balance between over-regulation, which could stifle innovation, and under-regulation, which could harm consumers and the financial system significantly.In reference to cryptocurrencies, Barr expressed concern particularly about stablecoins, highlighting them as an area of concern. He pointed out that a significant proportion of stablecoins presently in circulation are backed by illiquid assets, making it difficult to convert them into cash when necessary.

Stablecoins are a type of cryptocurrency that are meant to be backed by real-world assets, such as fiat currencies or commodities, to provide a more stable value than other cryptocurrencies. However, if the assets backing the stablecoin are illiquid, it poses a risk to holders of the stablecoin, as they may not be able to convert their holdings into cash when they need to.

Barr further explained that such a discrepancy between the value and liquidity of these stablecoins could lead to a scenario similar to a conventional bank run.

Barr stated:

“There’s a critical role for Congress to play right now in establishing a framework for stablecoins.”

Barr believes that any widespread usage of stablecoins without proper regulation from the Federal Reserve could put individuals, corporations, and the economy as a whole at risk.

 

If you would like to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram and CoinMarketCap Community.

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