US Fed to create new crypto team amid concerns about unregulated stablecoins

cointelegraph.com:

The United States Federal Reserve is set to create a “specialized team of experts” to keep up with developments in the cryptocurrency industry,  according to a Fed official, amid concerns from the Fed of “unregulated” stablecoins.

Speaking at the Peterson Institute for International Economics in Washington on Mar. 9, Vice Chair for Supervision Michael Barr admitted that crypto could have a “transformative effect” on the financial system, but added that “the benefits of innovation can only be realized if appropriate guardrails are in place.”

According to Barr, the new crypto team will help the Federal Reserve “learn from new developments and make sure we’re up to date on innovation in this sector,” adding:

Meanwhile, Barr noted that regulation needs to be a “deliberative process” to ensure a balance is reached between over-regulation which “will stifle innovation” and under-regulation which “will allow for substantial harm to households and the financial system”

Related: Fed signals a sharp rate hike in March due to inflation — Here’s how Bitcoin traders can prepare

One subsect of crypto that Barr highlighted as a point of concern was stablecoins.

He suggested that the assets backing many stablecoins in circulation are illiquid, meaning that it can be difficult to liquidate them for cash when needed, arguing:

He believes that unless regulated by the Fed, any widespread adoption of stablecoins could put households, businesses, and the broader economy at risk.

Caitlin Long, the CEO of Custodia Bank — which has consistently been rejected from joining the Federal Reserve System — pointed out the irony in the comments from Barr given her belief that Silvergate Bank collapsed due to liquidity issues arising from a bank run.

UM