- The U.S. Federal Reserve is planning to form a specialized team of experts to keep up with developments in the cryptocurrency industry.
- Barr stated that regulation must be a deliberative process in order to strike a balance between over-regulation and under-regulation.
According to a Fed official, the U.S. Federal Reserve is planning to form a specialized team of experts to keep up with developments in the cryptocurrency industry, in response to the central bank’s concerns about “unregulated” stablecoins.
Vice Chair for Supervision Michael Barr admitted at the Peterson Institute for International Economics in Washington on 9 March that crypto could have a transformative effect on the financial system, but added that the benefits of innovation can only be realized if adequate safeguards are in place.
Barr stated that the new crypto group will aid the Federal Reserve in learning from new developments and staying updated on innovation in this sector.
Striking a balance between over-regulation and under-regulation?
Barr stated that regulation must be a deliberative process in order to strike a balance between over-regulation, which stifles innovation, and under-regulation, which allows for significant harm to the entire financial system of the U.S.
The main source of concern, according to Barr, remains stablecoins. According to him, the assets backing many stablecoins in circulation are illiquid, which means the stablecoins can be difficult to liquidate for cash when needed.
He believes that widespread adoption of stablecoins unless regulated by the Fed could jeopardize households, businesses, and the broader economy.
Custodia Bank CEO Caitlin Long noted the irony in Barr’s comments, given her belief that Silvergate Bank failed due to liquidity issues caused by a bank run, it must be noted that Custodia Bank has been repeatedly denied membership in the Federal Reserve System.
Caitlin Long also mentioned the case of Silicon Valley Bank. Its shares dropped after a recent financial update revealed that it sold $21 billion in holdings at a loss of $1.8 billion, raising concerns that it was forced to sell to free up capital.
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Source by [earlynews24.com]