The Federal Reserve is “a long way” from deciding whether to proceed with a central bank digital currency and would only do so with clear support from the executive branch and authorizing legislation from Congress, Fed Vice Chairman for Supervision Michael Barr said today. Speaking at a fintech conference in Philadelphia, Barr also said he remains deeply concerned about stablecoin issuance without strong federal oversight.
“Stablecoins are a form of money, and the ultimate source of credibility in money is the central bank,” Barr said. “If non-federally regulated stablecoins were to become a widespread means of payment and store of value, they could pose significant risks to financial stability, monetary policy and the U.S. payments system. It is important to get the legislative and regulatory framework right before significant risks emerge.”
As for a CBDC, the Fed continues to speak to a broad range of stakeholders and conduct basic research in emerging technologies that might support a framework for the currency, Barr said. However, he stressed that investigation and research are not the same thing as deciding whether to actually issue a CBDC. “Given the importance of this infrastructure, investigating the potential opportunities, risks and tradeoffs for payments innovation is just one way the Fed fulfills its role in supporting the responsible innovation that enables a safe and efficient U.S. payments system,” he said.
Barr also spoke briefly about the new novel activities supervision program the Fed launched last month to oversee bank activities in digital assets and nonbank partnerships. Many banks that engage in such activities are already doing so safely and soundly, but “other institutions have some learning to do,” he said during a Q&A. “This team of experts will work with local supervisors on the ground to make sure our institutions have access to that expertise, access to that clarity and timely and expert judgment.”