Top Federal Reserve supervision executive Michael Barr said Friday that stablecoins require strong oversight to avoid risks. However, he noted the Fed remains undecided on pursuing a central bank digital currency (CBDC).
In remarks at a Washington, D.C., conference, Barr stated:
- Stablecoins “borrow the trust” of fiat currencies and need regulation to prevent stability and integrity threats.
- The Fed continues studying a potential digital dollar but hasn’t made a CBDC recommendation yet.
- Congress and the executive branch would need to authorize any Fed-issued virtual currency.
- International CBDC experiments can inform US decision-makers about responsible innovation.
Stablecoins Require Federal Regulation
Barr expressed deep concern over stablecoins issued without federal prudential oversight. When pegged to a government currency and used for payments and value storage, he said stablecoins derive trust from central bank standing.
The Fed has a strong interest in regulating stablecoins to safeguard stability and the payment system, Barr noted. This aligns with Fed guidance in August on strengthening stablecoin bank supervision.
Barr’s remarks indicate stablecoin regulation remains a top Fed priority amid ongoing Congressional efforts to advance stablecoin legislation.
Barr reiterated that the Fed is continuing to study a potential digital dollar as part of global CBDC research. But he emphasized that no decision has been made on whether to formally pursue issuance.
He stated that the Fed would only move forward with clear authorization from both Congress and the executive branch. The Fed is currently focused on areas like:
- Ledger architectures to record and verify digital asset ownership
- Tokenization models
- Digital asset custody approaches
While not imminent, Barr’s remarks signal the Fed is laying analytical groundwork should policymakers eventually pursue a digital dollar.