Fed Governor Warns Banks Should Be Careful With Crypto
According to Federal Reserve Vice Chair of Supervision Michael Barr, traditional banks are growing their use of distributed ledger technology and exposure to digital assets, and regulators are paying careful attention.
Barr, the Fed’s chief financial regulator on the Board of Governors, spoke at the Georgetown University Law Center’s D.C. Fintech Week in Washington on Wednesday:
“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.
Many of these activities pose novel risks, and it is important for banks to ensure that any crypto-asset-related activities they conduct are legally permissible and that banks have appropriate measures in place to manage those risks.”
Barr told an audience of attorneys, lobbyists, and politicians that he saw possible connections between the rise of financial innovation, including cryptocurrencies, and the events leading up to the 2008 global financial crisis.
Barr also cautioned banks considering launching their own stablecoins and other crypto-related initiatives that it is an open question if any of such projects would conform with current legislation owing to the new risks inherent in digital assets.
The Fed governor also restated statements made by Federal Reserve Chair Jerome Powell and Fed Vice Chair Lael Brainard that the central bank has not yet made a decision on developing a digital currency and plans to deploy its own real-time payments network, FedNow, between May and July of next year.
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