FED Officials Express Stablecoin Regulations With Their Concerns

Two Officials from the FED called for the new regulations in stablecoins and traditional finance.
The officials also shared about the stablecoin regulatory framework at the end of this year.

FED Vice Chair’s Concern on the Stablecoins

The Vice Chair of the Federal Reserve, Michael Barr, spoke at the Brookings Institution, Washington, D.C. on September 7, 2022. In the Speech that is named, “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 stated that “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 described 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 destabilizing 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 organized 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.”

She also said that stablecoins have more potential for risks and if it is not regulated properly then they may spill into the main core of the financial system.

While the FED is committed to its campaign of raising the interest rates to face inflation, the Central Bank will depend on data and stay little conscious of over-tightening.

Furthermore, the U.S. President’s Working Group on Financial Markets published a report in November 2021, that was related to stablecoins. This report was urging Congress to act quickly to enact applicable legislation.