Regulation of Cryptocurrencies Should Follow Traditional Banking Laws: Fed Official

Cryptocurrency operations require more regulatory control, according to Michael Barr, a former Ripple Labs consultant and dean of the law department at Michigan University who is now the vice chairman for supervision at the U.S. Federal Reserve.

On Wednesday, Barr stated at a Brookings Institution event in Washington D.C. that the Federal Reserve will collaborate with other bank authorities to monitor any cryptocurrency activities that banks engage in. This was his first address since taking on the post of Fed chairman. He also discussed stablecoin governance, said that cryptocurrencies haven’t yet fully realized their potential to increase financial inclusion, and denied that the Fed’s issuance of a digital dollar is an immediate requirement.

President Joe Biden appointed Barr, and he is expected to be a potent regulator of Wall Street institutions. Given that he had held a job in the business and served on Ripple’s advisory board, it has been less obvious what his views on digital assets will be.

“We plan to work with other bank regulatory agencies to ensure that crypto activity inside banks is well regulated, based on the principle of same risk, same activity, same regulation, regardless of the technology used for the activity,” said Barr. “I plan to make sure that the crypto activity of banks that we supervise is subject to the necessary safeguards that protect the safety of the banking system as well as bank customers.”

In the upcoming years, the Fed will have a say in how the government handles stablecoins like USDC from Circle Internet Financial and USDT from Tether. It is also anticipated to determine whether to launch a digital currency, a move that may have significant repercussions for the cryptocurrency market. A central bank digital currency (CBDC) has been portrayed favorably in Barr’s scholarly work, suggesting that it might further the government’s goals for financial inclusion.

Barr carefully addressed the topic of the digital dollar, stating that he concurs with the Fed’s existing stance that the matter should be thoroughly studied and that the Fed must first ensure that Congress and the White House are “on the same page” before acting. He said, “I’m not in crisis mode about the need to issue a CBDC.”

As the Fed’s top person for monitoring and policing financial institutions, the former senior official at the U.S. Department of the Treasury has broad jurisdiction. That primarily refers to bank-holding corporations in the context of the Fed. However, it also plays a part in regulating nonbank financial institutions deemed significant and intricate enough to endanger the rest of the system should they collapse. It’s conceivable that bitcoin businesses may eventually meet that description.

A few crypto businesses have actively pursued Fed master accounts over the last year. Last month, the Federal Reserve provided advice outlining how it would assess applications from non-traditional banks. When it comes to running the Fed’s agenda, the vice chairman is technically under Fed Chair Jerome Powell. However, Powell clarified in previous statements that he wants to defer to Barr on supervision issues.

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