Cryptocurrencies have potentially transformative impact on financial system-Fed
2023.03.09 12:23
Cryptocurrencies have potentially transformative impact on financial system-Fed
By Tiffany Smith
Budrigannews.com – Cryptocurrency technology still has the potential to have “potential transformative” effects on the financial system, according to the top Federal Reserve regulator, but it needs “guardrails” to make those effects a reality.
According to Fed Vice Chair for Supervision Michael Barr, the recent upheaval in the crypto market shows that the industry still poses a risk to traditional banks, but that the impact has been limited as regulators urge caution.
In recent months, the Federal Reserve and other U.S. bank regulators have taken a number of measures to ensure that banks are approaching the cryptocurrency industry cautiously. These measures include requiring banks to notify regulators of any crypto activities prior to proceeding and informing businesses that crypto deposits can be particularly volatile.
Barr said in prepared remarks, “These liquidity concerns are particularly acute for banks that have a meaningful portion of their balance sheets funded with such deposits,” one day after crypto-focused bank Silvergate Capital Corp (NYSE:.N) announced plans to liquidate after experiencing significant losses. Silvergate Capital Corp (NYSE:.N) is a subsidiary of Silvergate Capital Corp.
Barr said that regulators are busy figuring out what businesses could do in the space while remaining safe, rather than saying that banks have no role to play in crypto. He said that the crypto technology could make financial markets and payment systems work better and cost less.
“We want to make guardrails, while accounting for development that can help purchasers and the monetary framework all the more comprehensively,” he said.
