- In the past few months, the U.S. The financial meltdown is on the rise.
- Michael Barr talked about increasing money laundering, theft, high volatility, and fraud.
On 12 October, Michael Barr, Vice Chairperson of the Fed, at DC fintech week, mentioned that Crypto-asset-related activities could create “new risks” for banks and their customers, prompting the U.S. The Federal Reserve may be prompted to develop more rules.
Michael further stated that “The board is working with our colleagues at the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to ensure that crypto-asset related activities banks may become involved in are well regulated and supervised, to protect both customers and the financial system.”
Crypto-prone activities introduce banks to unprecedented risks; Michael noted, Emphasising Banks need to ensure that those activities are legally permitted and be prepared to control the risks.
While delivering his speech, Michael also talked about some major elements like money laundering, theft, high volatility, and fraud.
Barr underlined that highly volatile cryptocurrencies are impossible to alternate for fiat currencies; he added that Stablecoins ” has more potential to function as privately issued money.”
Michael informed that Fed is presently working with several regulatory institutions to prepare an effective operational framework for Stablecoins. In September 2022, Barr publicly recommended the US Congress to frame a suitable framework for stablecoins.
On 7 September 2022, The Vice Chair of the Federal Reserve, Michael Barr, spoke at the Brookings Institution in Washington, D.C. In the speech “Making the Financial System Safer and Fairer,” he discusses the FED’s work overseeing the safety and soundness of banks. It will also support its financial stability mandate.
Barr noted, “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.”
He defined Stablecoins as “like other unregulated private money, could pose financial stability risks.5 History shows that in the absence of appropriate regulation, private money is subject to destabilising runs, financial instability, and the potential for widespread economic harm.”
Additionally, On September 7, 2022, the Vice Chair of FED, Lael Brainard, spoke about the crypto financial system at a conference. This conference is organised by the Cleaning House and Bank Policy Institute in New York. She said the crypto financial system “has all the same risks that we’re very familiar with from traditional finance.”
On 30 May 2022 Brainard wrote that the digital dollar or CBDC could coexist and be complementary to the stablecoins and commercial bank money while providing a safe liability from the central bank in the existing digital financial ecosystem, quite similar to the co-existence of cash with commercial bank money at present.
The Fed Vice Chair also explained that there is the utmost necessary thoughtful regulation considering the recent collapse experienced by Terra network’s algorithmic stablecoin UST and its native token LUNA.
She said that the digital financial system is experiencing rapidly ongoing evolution at both the national and international levels, which makes the regulators lead to frame the question about the need for Central Bank Digital Currency today.
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