US Federal Reserve vice chair for Supervision Michael Barr has called for crypto regulation, citing that the new crypto tech poses potential transformative effects on the financial system.
Barr noted that the recent turmoil in crypto suggests that the sector poses a risk to the traditional banking system.
Fed Calls For Agent Crypto Regulation
The top regulatory official for the Fed spoke in a short interview to the Wall Street Journal on Thursday. During the interview, Michael Barr called on lawmakers to create laws that regulate the crypto sector.
“Our goal is to create guardrails while making room for innovation that can benefit consumers and the financial system more broadly,” said Barr.
There’s a critical role for Congress to play right now in establishing a framework for stablecoins because they pose the potential for systemic risk if they’re not regulated appropriately, Barr added.
The Federal Reserve’s top banking regulator is spotlighting stablecoins as a priority in its efforts to dominate the nascent crypto sector.
The regulators have called for stepped-up actions against the crypto industry following a brutal market selloff and the collapse of the FTX crypto exchange last year, which left many crypto and non-fungible token in massive losses.
Fed Warns Investors On Crypto Investments
In recent weeks, the monetary authority in the United States has taken several measures to ensure banks approach crypto cautiously.
Some include requiring them to flag any crypto activities before proceeding and warning firms that crypto deposits can be particularly volatile.
Barr’s sentiments appear a day after the crypto bear market pushes Silvergate Capital Corp., one of the crypto market’s top banks, to shut down its operations and return all deposits to investors.
The poor economic climate has forced it to sell off assets at a steep loss to cover billions of dollars of withdrawals.
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