- The Federal Reserve is to create a crypto analysis team that will follow trends and developments in the sector
- The team will strike a balanced approach between stifling innovation and consumer protection
- The team was announced by Vice Chair for Supervision Michael Barr
The Federal Reserve is planning to establish a team of specialized experts to stay updated on the latest developments in the cryptocurrency industry, following growing concerns regarding unregulated stablecoins. Vice Chair for Supervision Michael Barr yesterday revealed the creation of the team, acknowledging that cryptocurrencies could potentially have a significant impact on the financial system but also stressed that the benefits of innovation could only be realized if adequate safeguards were in place.
Analysis and Recommendation will be “Deliberative Process”
Barr was speaking at the Peterson Institute for International Economics in Washington yesterday when he spoke of the new team, which he said will help the Federal Reserve “learn from new developments and make sure we’re up to date on innovation in this sector.” Barr also noted that regulation needs to be a “deliberative process” to prevent over-regulation that would “stifle innovation” and under-regulation that would “allow for substantial harm to households and the financial system.”
Stablecoins Will be Focus
Barr also pointed to the issues with stablecoins that are not provably backed, explaining that a “mismatch in value and liquidity is the recipe for a classic bank run.” This issue is already being addressed following news that the House Financial Services Committee is drafting legislation that would place a two-year ban on algorithmic stablecoins like TerraUSD as part of a wider bill on pegged currencies.
Barr didn’t expand much on the team itself or exactly what its remit will be, and it’s not yet clear if, despite Barr’s promises of a balanced approach, it will end up being a positive thing for the industry or not.
