Tag: federal reserve

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Vice Chair Michael Barr Discusses New Novel Activities Program At Federal Reserve

Michael Barr

In a fireside chat at Day 2 of the Seventh Annual Fintech Conference at the Federal Reserve Bank of Philadelphia on Friday,  Federal Reserve Vice Chair Michael Barr participated in a fireside chat moderated by Sunayna Tuteja, the Federal Reserve System’s Chief Innovation Officer.

Before he answered questions, Barr delivered a speech entitled, “The Federal Reserve’s Role in Supporting Responsible Innovation,” (read it here) where he discussed the Fed’s ongoing exploration of Central Bank Digital Currencies (CBDCs), the launch of FedNow as well as where stablecoins or “private money,” as Barr termed it, may fit in the U.S. financial system.

He said, “I remain deeply concerned about stablecoin issuance without strong federal oversight.” Nevertheless, Barr stressed the importance of financial innovation and that it was “absolutely essential for our economy.”

Below is an edited transcript of Vice Chair Barr’s discussion with the Fed’s Sunaya Tuteja.

on payments innovation and financial inclusion

Vice Chair Michael Barr: “…The payment system is one of these aspects of finance that is so critical for people’s everyday lives. Most of us can take for granted that we can get paid, we can store money and we can pay bills in a pretty seamless way if you’re in the higher socio-economic classes of people who have access to these kinds of financial services. But if you’re a low or moderate income person payment services actually can be a real problem. It can be hard to receive your income. A lot of people still get paid by check and have to get that check cashed somewhere. A lot of low income people 5% of Americans are outside the banking system and don’t have a bank account at all. 15% of Americans according to the FDIC are underbanked that is they have a bank account but they still use expensive alternative financial services.” Continue reading “Vice Chair Michael Barr Discusses New Novel Activities Program At Federal Reserve”

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Powell Says Stablecoins Are Money As McHenry Announces Markup For Digital Assets Legislation

Fed Chair Powell

Jerome Powell, the Republican Federal Reserve Chair appointed during the Trump administration, appeared before the House Financial Services (HFS) Committee today for his semi-annual hearing, “The Federal Reserve’s Semi-Annual Monetary Policy Report” a.k.a. the Humphrey-Hawkins report.

Although Powell’s prepared testimony was bereft of anything digital asset-related as was the Committee’s agenda for the hearing (see it), Chair Powell’s Q&A with members of Congress provided a taste of hot button digital asset issues for the Fed.

HFS Chair Rep. Patrick McHenry (R, NC) kicked things off right before Powell’s testimony saying before the full Committee that the stablecoin and market structure bills were on the HFS schedule for next month. Chair McHenry stated in the third person:

“The Chair would further announce to committee members that the Chair’s intention is that in the second week we return in July, we will have a markup, and that markup will include two important bills. One is giving digital assets a market structure and federal regulatory remit. And the second is a federal stablecoin regime. It is the intention of the Chair to have that as two pieces of committee markup in the second week when we return in July.”

More precisely, Digital Chamber’s Cody Carbone tweeted the tentative date for markup of both bills is July 19. (See: what is markup?)

After McHenry’s brief announcement, the hearing commenced.

Click below or scroll down for a selection of what Powell said about digital assets in answer to several Members of Congress during the Q&A portion of the hearing. Video is here.

(lightly edited for clarity)

Rep. Waters (D, CA): I’ve argued that we should allow states to be part of this process, but we must have a strong enforceable federal floor with the roll by the Federal Reserve to approve and provide oversight of payment stablecoins issued by non-banks in order to ensure that consumers are protected. Such a framework is similar to our dual-banking system and it would ensure that non-banks and banks are treated the same. We should also bear in mind that payments stablecoins are a new form of currency intended to allow individuals to pay for things with them. As such, do you agree that it is important for the Fed as our central bank to have a chance to approve or decline any state license non-bank entity before it starts issuing payments stablecoins nation-wide? Continue reading “Powell Says Stablecoins Are Money As McHenry Announces Markup For Digital Assets Legislation”

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Fed Needs To Maintain Oversight on Crypto -And Stablecoins Which Align With US Dollar

Michael Barr, Federal Reserve

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.

Continue reading “Fed Needs To Maintain Oversight on Crypto -And Stablecoins Which Align With US Dollar”

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The Fed Wants A Stablecoin Law From Congress

The Fed Wants A Stablecoin Law

Stablecoin legislation is on the minds of DC policymakers this fall as it remains among the lowest of the low-hanging legislative initiatives in crypto which could ultimately result in a law.

Given the widespread agreement on its need, the only question seems to be – is it this year or next?

As Congress began its return from recess last week, The U.S. Federal Reserve brought its lens to stablecoins. Fed Chair Jerome Powell and its new Vice Chair for Supervision, Michael S. Barr, participated in D.C. think tank events.

Mr. Barr presented at the Brookings Institution conference and provided a broad overview of his priorities which center on maintaining the stability of the U.S. banking system which seemingly puts him front-and-center in the stablecoin debate.

The Vice Chair position Barr now holds was originally established due to passage of the Dodd-Frank Act and addressed the need for a financial watchdog given the extreme risk-taking by banks that led to the Great Financial Crisis of 2008.

Prior to joining the Fed, Barr was in academia as dean of the University of Michigan. He’s also very familiar with crypto having served as an advisor in 2015 to Ripple Labs.

Stablecoins

In his speech, Barr aligned himself with the urgent calls in favor of stablecoin rulemaking saying, “Stablecoins, like other unregulated private money, could pose financial stability risks. History shows that in the absence of appropriate regulation, private money is subject to destabilizing runs, financial instability, and the potential for widespread economic harm.”

Vice Chair Barr added that he believed Congress needs to work quickly on legislation that brings stablecoins “inside the prudential regulatory perimeter.”

Continue reading “The Fed Wants A Stablecoin Law From Congress”

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Project Hamilton Turns from CBDCs to Short-Term Treasuries and Stablecoins?

Permissionless 2022 with Eric Peters

From the start of the fireside chat at last week’s Permissionless conference, red-pilled One River Asset Management founder and CIO Eric Peters delighted the decentralized finance throngs with one good story after another.

Anecdotes ranging from his firm’s $600 million of Bitcoin and Ethereum purchases via Coinbase in 2020 to cold-calling outgoing SEC Chair Jay Clayton the day after he left the commission in order to bring him aboard as a key advisor did not disappoint.

But, perhaps most revelatory was the closing anecdote raised by moderator Brett Tejpaul of Coinbase around his and Peters involvement in Project Hamilton – a Central Bank Digital Currency (CBDC) research project with huge implications for the U.S. dollar, the world’s reserve currency and arguably the most important source of American power worldwide.

Project Hamilton, named after Alexander Hamilton and Margaret Hamilton, may have special focus around a CBDC for the United States financial system, but Tejpaul said there was a “group” of people who are trying to convince the Treasury to go in a new direction using privatized stablecoins rather than a CBDC.

Continue reading “Project Hamilton Turns from CBDCs to Short-Term Treasuries and Stablecoins?”