Federal Reserve Vice Chair for Supervision Michael Barr says crypto-assets are “unlikely to grow into money substitutes” because they have proven to be so volatile and posed “novel” risks.
Barr was speaking at the annual fintech ecosystem talk shop in Washington, DC Fintech Week, where he said the idea you could use them to pay for transactions was improbable. However, he had some faint praise for stablecoins, saying they have a “greater capacity to function as privately issued money.”
Stablecoins can be pegged to a currency or a commodity, like gold, although most currency linked ones are tied to the dollar, such as Tether, the world’s largest stablecoin, with a market capitalization of more than $68 billion at the time of writing.
Barr added that he believed stablecoins “pose specific, and well-understood risks, similar to other types of money-like assets,” although he cautioned: “History has shown that money-like assets are subject to runs that can threaten financial stability.”
Quite.
The Fed is especially interested in stablecoins that are linked to the US currency, said Barr, although he didn’t name any specifically.
The news comes a day after cryptocurrency exchange Bittrex paid a whopping $53 million to settle claims by the US Treasury’s Office of Foreign Assets Control and its Financial Crimes Enforcement Network that the platform broke US sanctions, federal money laundering laws, and other banking rules.
The exchange was alleged to have done business with netizens in Cuba, Sudan, Syria, Iran and Crimea, which would have been in violation…
