Federal Reserve official Michael Barr emphasized the necessity of regulating stablecoins in prepared remarks on Friday. He stressed that when an asset is tied to a government-issued currency and functions as a means of payment and a store of value, it gains the trust associated with the central bank. Therefore, the Federal Reserve has a strong interest in ensuring that all stablecoin offerings operate within a suitable federal regulatory framework to safeguard financial stability and the integrity of the payments system.
The Federal Reserve has heightened its focus on stablecoins and has recently announced additional measures to bolster its oversight of banks involved in stablecoin activities. Barr previously expressed deep concerns about the issuance of stablecoins without robust federal oversight.
In Congress, lawmakers have been engaged in debates about how to regulate stablecoins, aiming to establish a federal framework. While the House Financial Services Committee made progress by advancing a stablecoin bill, it faced criticism for a provision allowing state regulators to approve stablecoin issuance without Federal Reserve involvement.
Continued Research into Central Bank Digital Currencies (CBDCs)
The central bank continues to explore central bank digital currencies (CBDCs). Barr clarified that the Federal Reserve would only proceed with a CBDC with clear support from the executive branch and authorization from Congress. Research efforts are currently focused on end-to-end system architecture, including ledger maintenance, security, verification of digital asset transactions, as well as tokenization and custody models.
Overall, Barr’s remarks underscore the critical importance of regulating stablecoins within a federal framework to ensure the stability of the financial system and payment mechanisms.
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