Stablecoins need to be regulated, says Federal Reserve's Barr

Quick Take

  • The Federal Reserve has a strong interest in making sure that any stablecoin offerings are folded within a federal regulatory framework, Fed official Michael Barr said on Friday. 

Stablecoins need to be regulated, top Federal Reserve official Michael Barr said on Friday in prepared remarks.

When an asset is pegged to a government-issued currency and also used as a means of payment and a store of value, it "borrows the trust of the central bank," the vice chair of supervision said at a conference in Washington D.C.

"So, the Federal Reserve has a strong interest in ensuring that any stablecoin offerings operate within an appropriate federal prudential oversight framework, so they do not threaten financial stability or payments system integrity," Barr said. 

The central bank has increased its focus on stablecoins and in August announced new guardrails to strengthen its supervision of banks involved in stablecoin activity. Barr said he was "deeply concerned" about issuing stablecoins without strong federal oversight, in remarks last month. 

Meanwhile, in Congress, lawmakers have battled over how stablecoins should be regulated in an effort to create a federal framework. 

The House Financial Services Committee made some progress when it advanced a stablecoin bill, though at the time Rep. Maxine Waters, D-Calif, criticized the bill over a provision that would allow state regulators to approve stablecoin issuance without Federal Reserve input.


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Waters told Politico this week that she expects talks on that stablecoin bill to start back up. 

CBDCs research ongoing

The central bank is continuing to research central bank digital currencies, but Barr emphasized that the Federal Reserve would only go ahead with "clear support from the executive branch and authorizing legislation from Congress." 

The central bank published a report last year to examine the pros and cons of a potential CBDC. Barr said no decision has been made on whether the central bank would issue a CBDC. 

"The research is currently focused on end-to-end system architecture, such as how ledgers that record ownership of and transactions in digital assets are maintained, secured, and verified, as well as tokenization and custody models," Barr said. 

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Sarah is a reporter at The Block covering policy, regulation and legal happenings. Before, Sarah was a reporter with CQ Legal writing about securities regulation, which is where she first started reporting on crypto. Sarah has also written for The Bond Buyer and American Banker, among other finance-related publications. She graduated from the University of Missouri and earned a degree in print and digital journalism. Sarah is based in Washington D.C., and is an avid coffee lover. You can follow her on Twitter @ForTheWynn.


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