Crypto-asset related activities may pose “novel risks” to banks and their customers, prompting the U.S. Federal Reserve to develop further regulations, Fed vice chair for supervision Michael Barr said in a speech Wednesday at D.C. Fintech Week.
See related article: U.S. Fed has growing interest in CBDCs, says Jeng at Crypto Council for Innovation
Fast facts
- “The board is working with our colleagues at the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) to ensure that crypto-asset related activities banks may become involved in are well regulated and supervised, to protect both customers and the financial system,” Barr said.
- Crypto-related activities expose banks to novel risks, Barr said, insisting that banks need to ensure those activities are legally permissible and be prepared to control risks.
- Some risks that Barr mentioned in his speech were fraud, theft, manipulation, money laundering and high volatility.
- Highly volatile crypto assets will be an unlikely substitute for fiat currency, said Barr, who added that stablecoins have “greater capacity to function as privately issued money.”
- The Fed is working with other regulatory agencies to set up the regulatory framework for stablecoins, according to Barr, who publicly urged the U.S. Congress to prepare legislation on stablecoins last month.
- Bank of New York Mellon Corp., the largest custodian bank in the world, announced the launch of its first custody service on Bitcoin and Ether earlier this week.
See related article: Fed officials call for stablecoin regulations amid concerns over financial stability