Fed Vice Chair Barr gives update on CBDC analysis, plugs stablecoin legislation


The Federal Reserve Bank vice chairman spoke on the Philadelphia Fed’s fintech occasion on Sept. 8 about what the central financial institution’s function is in monetary innovation. Research and supervision was the quick reply, with a nod to the FedNow Service.

Along with the usual disclaimer about it making no choices with out congressional authorization, Barr supplied an summary of the Fed’s “current focus” of central financial institution digital forex (CBDC) analysis. He characterised it as “basic research […] that might support a CBDC payments backbone, or for other purposes in the existing payments system.”

Specifically, Barr talked about system structure for recording transactions and possession in ledgers and tokenization fashions. A FEDS Notes publication the identical day on wholesale CBDCs additionally emphasised that “the technology associated with tokenized platforms is not incompatible with existing central bank money functioning as a settlement asset.”

Barr reminded his viewers of the Fed’s novel actions supervision program, which it introduced last month. That devoted staff of supervisors can present suggestions that will enable a federally supervised financial institution to acquire “written supervisory non-objection” to its novel activities involving stablecoins, amongst different issues. Barr stated this exercise aligns with Office of the Comptroller of the Currency (OCC) insurance policies outlined in interpretative letters 1174 and 1179.

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Strong federal oversight of stablecoins, which is foreseen within the OCC letters, is within the curiosity of the Fed, Barr stated, as a dollar-pegged stablecoin “borrows the trust of the central bank.” He expressed his appreciation for present legislative efforts:

“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.”

The Fed geared up giant banks, regional banks, neighborhood banks and credit score unions with the rails for broadly accessible 24-hour instantaneous funds by the FedNow Service, launched in July, Barr stated. He added that present volumes of the service are small, however it is up to the depository institutions to make the service obtainable.

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