The Federal Reserve added its fingerprints to DC Fintech Week as the recently appointed Michael Barr, Vice Chair for Supervision of the Board of Governors at the Federal Reserve, presented a policy address titled “Managing the Promise and Risk of Financial Innovation.”
Get the transcript of Barr’s speech on the Fed’s website.
Barr began by recognizing the broad umbrella of fintech – without mentioning crypto – saying that financial innovation can positively grow the financial system, serve consumers more efficiently and better address underserved communities.
Unsurprisingly, he believed the fintech roadmap ahead included regulation:
“I would note with some humility that striking the right balance between creating an enabling environment that supports innovation and managing related risks to businesses, households, and the stability of the financial system is no easy task. When regulations are too prescriptive or regulators too cautious, they run the risk of stifling innovation and locking in the market power of dominant participants in ways that can raise costs and limit access. When regulation is lax or behind the curve, it can facilitate risk-taking and a race to the bottom that puts consumers, businesses, and the economy in danger and discredits new products and services with consumers and investors.”
Barr then re-iterated crypto themes of fraud, manipulation and money laundering and made clear that oversight was necessary both inside and outside banks.
Outlining the oversight committee, he said that the Federal Reserve Board of Governors was working with 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.”
He emphasized that the oversight regime didn’t mean to “discourage banks from providing access to banking products and services to businesses associated with crypto-assets.” Perhaps this will increasingly assuage concerns coming from institutional investors who have moved slowly with digital asset investment due to a lack of approved government guardrails for the new crypto ecosystem.
So regulation needed; and oversight already happening.