Fed Actively Working With OCC, FDIC On Crypto Regulations
U.S. Federal Reserve Vice Chair Michael Barr on Wednesday said the Fed is working with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to regulate and supervise crypto-asset activities. Michael Barr also highlighted stablecoin regulations, risks in tokenizing bank liabilities, advancing consumer autonomy, FedNow Service digital payment system, and CBDC.
Michael Barr Hints New Regulations for Crypto Assets
During a D.C. Fintech Week speech on October 12, Michael Barr said the Federal Reserve Board, along with OCC and FDIC, looks to strengthen regulation and supervision of crypto-asset activities that banks are involved in. It will ensure banks manage risks and provide crypto services that protect customers and the financial system.
Furthermore, the recent crypto market crash exposed the risks and interconnectedness in the crypto market. Similar events have potential risks for banks such as deposit fluctuations, deposit insurance by crypto-asset companies, and other liquidity risks. The regulators will provide guidance to the banking sector in the coming months to effectively manage the risks.
Michael Barr believes crypto assets are unlikely to become money substitutes and dominant means for payments. However, the Fed sees stablecoins linked to the U.S. dollar may function as privately issued money. Therefore, the Fed is working with other regulators to introduce a regulatory framework for stablecoins before their use increases.
Banks offering dollar-denominated tokens on distributed ledger networks must engage with regulators to discuss the risks and benefits of the new use case. Also, banks must ensure the services are compliant with banking and relevant laws.
Michael Barr revealed the digital payments platform FedNow Service that enables real-time, secure, and cost-efficient transfer of money. The Fed plans to launch the FedNow by July next year.
Meanwhile, the Fed has not yet decided to issue a CBDC and prioritize works on crypto regulations. The U.S. might look at how CBDCs of other countries perform before believing to launch Digital Dollar.
Crypto Participants Push for Crypto Laws
Crypto industry leaders claim it’s crucial for the U.S. to introduce bespoke crypto regulations. It will help boost crypto adoption and prevent regulators from over-regulating crypto companies and cryptocurrencies. Grayscale CEO Michael Sonnenshein thinks the legislators must resolve the CFTC and the SEC fight over crypto jurisdiction. Also, it may also make the SEC approve a spot Bitcoin ETF.
Cardano founder Charles Hoskinson believes the U.S. Congress should fast-track pass crypto laws and resolve issues between regulators.
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