US Federal Reserve Vice Chairman Michael Barr says crypto assets are “unlikely to grow into money substitutes” because they have proven so volatile and pose “new” risks.
Speaking at the annual fintech ecosystem talkshop in Washington, DC Fintech Week, Barr said the idea that you could use them to pay for transactions was unlikely. However, he did offer a bit of praise for stablecoins, saying they have a “greater ability to function as privately-issued money.”
Stablecoins can be pegged to a currency or commodity such as gold, although most currency-pegged coins are pegged to the dollar, such as Tether, the world’s largest stablecoin with a market cap of more than $68 billion at the time of writing.
Barr added that he believes 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 experience runs that can threaten financial stability.” “
The Fed is particularly interested in stablecoins pegged to the U.S. currency, Barr said, 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 U.S. Treasury Department’s Office of Foreign Assets Control and its Financial Crimes Enforcement Network that the platform violated U.S. sanctions, anti-money laundering laws, and… violated federal and other banking regulations.
The exchange is said to have done business with netizens in Cuba, Sudan, Syria, Iran and Crimea, in violation of US sanctions.
Trust the central banks
Barr earlier this month echoed comments from Reserve Chair Jerome Powell, who said a central bank will always be the number one source of trust for money — though we note that at the time Powell was speaking to a roundtable with other concerned central bank leaders about decentralized finance at a conference organized by France’s central bank, Banque de France.
Barr noted that stablecoins borrow the trust placed in central banks, which is why regulators have been particularly keen to create a strong federal framework for their use.
Google Cloud entered the leagues of those accepting cryptocoin this week, although the payment method will initially only be available to a select few.
Barr, whose job it is to oversee the way the Fed oversees and regulates banks and other financial and fintech types, failed to mention the environmental requirements of all crypto assets — whether stablecoin or more volatile cryptocurrency like bitcoin — which the energy-intensive blockchain than use a consensus mechanism.
Netscape developer Jamie Zawinski tells The registry in January that there is “literally nothing in the modern technology ecosystem that is more short-sighted” and branded crypto an “ecological disaster” whose main effect was the incineration of the planet.
But just a month after a central bank had to work to protect a country from an actual market meltdown after the UK launched a mini-budget that sent its public debt into freefall, we think it’s fair to say that Crypto fans and fintechs alike should get up and pay a little attention. ®
https://www.theregister.com/2022/10/13/america_use_bitcoin_instead_of/ America, use bitcoin instead of old-school money? Unlikely • The register