Stablecoins are commonly described as a cure for cryptocurrency volatility. However, Michael S.BarrVice President for Supervision for USA federal reserve fears they could pose “a risk to the financial stability” of the country.
See also: TOP STABLECOINS & TYPES OF STABLECOINS
Barr said it’s important to get the regulatory framework right. “The report of the President’s Working Group on Stablecoins, released about a year ago, called on Congress to take the necessary action to ensure that stablecoins, particularly those used as a means of payment, are subject to prudential regulation,” Barr said in his speech at DC Fintech Week.
Noting that crypto assets have proven to be highly volatile and unlikely to become viable means of payment for transactions, he added that “dollar-pegged stablecoins are of particular interest to the Federal Reserve.”
While stablecoins such as tether USDT/USD and USD coin USDC/USD have rallied after breaking away from the US dollar Terra VAT/USD crash caused considerable concern about stablecoins. Important coins such as Bitcoin BTC/USD, ether ETH/USD and Dogecoins DOGE/USD were far more volatile, with a less than impressive performance so far this year.
See more: CRYPTO AND DEFI 101: GASOLINE INTRODUCTION TO BLOCKCHAIN
Barr warned banks about the potential risks of crypto-related activities and suggested subjecting crypto service providers to similar regulations as traditional financial institutions.
He seemed to encourage banks to look into issuing tokens on distributed ledger networks, but “only in a controlled and limited way.”
“That [Fed] is working with our colleagues at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to ensure that crypto-asset related activities in which banks may be involved are well regulated and monitored,” he said.
