During a conference in Washington D.C., the vice chair of supervision emphasized that when an asset is linked to a government-issued currency and used for both payment and storing value, it essentially relies on the trust of the central bank. Therefore, the Federal Reserve has a significant interest in ensuring that any stablecoin offerings are subject to appropriate federal prudential oversight. This is crucial to prevent these offerings from posing a threat to financial stability or the integrity of the payments system, according to Barr.
In response to the growing prominence of stablecoins, the central bank has intensified its focus on this matter and introduced new regulations in August to enhance its supervision of banks involved in stablecoin activities. Barr expressed his deep concerns about the issuance of stablecoins without robust federal oversight in his previous statements.
Meanwhile, lawmakers in Congress have been engaged in a debate over the regulation of stablecoins in an attempt to establish a federal framework. The House Financial Services Committee has made some progress by advancing a stablecoin bill. However, at the time, Representative Maxine Waters from California criticized the bill due to a provision that would grant state regulators the authority to approve stablecoin issuance without input from the Federal Reserve.
Waters informed Politico this week that she anticipates the resumption of discussions regarding the stablecoin bill.
CBDCs research ongoing
The central bank is actively engaged in conducting research on central bank digital currencies (CBDCs). However, Barr emphasized that the Federal Reserve would proceed with implementing a CBDC only with explicit support from the executive branch and legislative authorization from Congress.
In a report issued last year, the central bank assessed the advantages and disadvantages of a potential CBDC. Barr stated that no definitive decision has been made regarding the issuance of a CBDC by the central bank.
Barr explained that the ongoing research primarily focuses on developing the comprehensive system architecture, including aspects such as ledger management for recording ownership and digital asset transactions, enhanced security measures, and verification protocols. Additionally, the research encompasses exploring tokenization methods and models for safekeeping the assets.