By AMB Crypto - 5 months ago - Reading Time: 2 minutes
Federal Reserve VC calls for stablecoin regulation
Michael Barr called for a robust regulatory framework, preferably determined by Congress, to govern stablecoins. Moody’s Analytics noted that the stablecoin market has shown increased stability.In recent remarks at the DC Fintech Week event, Michael Barr, the Vice Chair for Supervision at the Federal Reserve, emphasized the need for strong federal regulation of stablecoins to ensure the stability of the US financial system, per an article by Bloomberg.
He expressed concerns about privately issued stablecoins pegged to assets like the US dollar. He also noted their potential to disrupt the broader financial landscape if left unchecked.
Barr called for a robust regulatory framework, preferably determined by Congress, to govern stablecoins. He also highlighted that the Federal Reserve continues to study the underlying technologies for a central bank-backed digital currency.
However, he added, the Federal Reserve will not proceed without consent from Congress and the executive branch.
Emphasis on stability and efficiency in the crypto space
Nellie Liang, the Under Secretary for Domestic Finance at the Treasury Department, shared her perspective on the role of unbacked cryptocurrencies and stablecoins in the financial system. She noted that it is challenging to predict their future role.
However, she acknowledged the potential of distributed ledger technology to bring efficiency to payment and settlement processes.
Barr emphasized the Federal Reserve’s commitment to addressing US inflation concerns and ensuring that inflation remains in line with the target of 2%. He holds a pivotal role as a Fed governor, responsible for voting on monetary policy,
Michael Hsu, the Acting Comptroller of the Currency, made a clear distinction between the cryptocurrency market and tokenization.
Hsu emphasized that the crypto world suffers from fraud, scams, and security breaches, with some of the largest players operating without regulation. He also stressed that retail investors drive this space as they seek profit opportunities.
In contrast, tokenization concentrates on addressing real issues within the financial sector, especially those related to settlement processes.
Hsu underlined that when executed correctly, tokenization holds the potential to simplify and streamline financial operations, mitigating risks, reducing friction, and lowering fees.
Regarding concerns about the stability of banks, Hsu assured investors that the vulnerabilities that led to industry disturbances in March have been addressed.
He highlighted that his agency has intensified supervision efforts to mitigate risks and enhance the stability of the banking sector.
Moody’s Analytics note stablecoin stability
This comes on the backdrop of Moody’s Analytics introducing a novel stablecoin service, the Digital Asset Monitor (DAM). DAM employs artificial intelligence to predict potential depegging events within a 24-hour timeframe.
It also offers real-time insights into the liquidity and stability of stablecoin issuers.
Moody’s noted that the stablecoin market has shown increased stability in its recent announcement. In 2023, there were 1,914 depegging incidents, with 609 involving large-cap fiat-backed stablecoins.
This is a decline from 2,847 depeggings observed in 2022, with 707 large-cap incidents.
Original source: AMB Crypto