Fed Forms Expert Team To Balance Crypto Regulation

• The US Federal Reserve is creating a specialized team of experts to stay updated on cryptocurrency developments in order to find a balance between over-regulation and under-regulation.
• Vice Chair for Supervision Michael Barr spoke about the potential transformative effect cryptocurrency could have on the financial system, but also raised concerns about unregulated stablecoins.
• Custodia Bank CEO Caitlin Long noted the irony and risk associated with liquidity issues caused by bank runs and Silicon Valley Bank’s forced sale of assets.

US Federal Reserve Forming Crypto Team

The U.S. Federal Reserve is planning to form a specialized team of experts to keep up with developments in the cryptocurrency industry, in response to the central bank’s concerns about „unregulated“ stablecoins. Vice Chair for Supervision Michael Barr admitted at the Peterson Institute for International Economics in Washington on 9 March that crypto could have a transformative effect on the financial system, but added that the benefits of innovation can only be realized if adequate safeguards are in place.

Finding Balance Between Over-Regulation & Under-Regulation

Barr stated that regulation must be a deliberative process in order to strike a balance between over-regulation, which stifles innovation, and under-regulation, which allows for significant harm to the entire financial system of the U.S. The main source of concern, according to Barr, remains stablecoins; their illiquid asset backing makes them difficult to liquidate for cash when needed.

Criticism from Custodia Bank CEO

Custodia Bank CEO Caitlin Long noted the irony in Barr’s comments given her belief that Silvergate Bank failed due to liquidity issues caused by a bank run; Custodia Bank has been repeatedly denied membership in the Federal Reserve System. She also mentioned Silicon Valley Bank’s situation; its shares dropped after its financial update revealed it had sold $21 billion in holdings at a loss of $1.8 billion raising concerns it was forced to sell these assets to free up capital.

Benefits With Right Safeguards In Place

Barr believes widespread adoption of stablecoins unless regulated by the Fed could jeopardize households, businesses and broader economy; however he also believes appropriate safeguards need to be put into place so that any benefits resulting from cryptocurrency innovation can be realized safely.

New Crypto Group To Aid Fed

The new crypto group will aid The US Federal Reserve in learning from new developments and staying updated on innovation within this sector – aiding them find an appropriate balance between over-regulation & under-regulation so as not too stifle or allow unknown harms against citizens & business alike from unstable asset backing of cryptocurrencies .