Fed Vice Chair Michael S. Barr Calls for Stablecoin Regulation

Michael S. Barr, vice chair for supervision at the Federal Reserve, addressed the increased experimentation with new payment technologies, such as stablecoins and central bank digital currencies (CBDCs), on Friday (Oct. 27).

During the Economics of Payments XII Conference held at the Federal Reserve Board in Washington, D.C., Barr emphasized the need for regulation when it comes to stablecoins and highlighted ongoing research regarding CBDC, according to opening remarks released by the Federal Reserve.

Emphasizing the need for regulation of stablecoins, Barr said they represent a form of private money that borrows the trust of the central bank. The Federal Reserve has a strong interest in ensuring that stablecoin offerings operate within a prudential oversight framework to safeguard financial stability and payments system integrity, he said.

Regarding CBDCs, Barr noted the ongoing research and engagement with stakeholders to explore the potential of a digital analog to traditional banknotes. While the Federal Reserve supports further research, Barr emphasized that no decision has been made on issuing a CBDC. Clear support from the executive branch and authorizing legislation from Congress would be necessary for any such decision, he said.

Barr also emphasized the importance of international collaboration and coordination in payments systems. He mentioned the G20 governments’ endorsements of a roadmap for enhancing cross-border payments, which aims to make them faster, cheaper, more transparent and more accessible globally. The Federal Reserve continues to work with the international community on these issues, recognizing the significance of global cooperation in improving the payments system, Barr said.

In his opening remarks, Barr also welcomed the opportunity to discuss the payments system during a time of great change and promise. While acknowledging the surge in interest in emerging payment technologies, Barr emphasized the importance of advancing research in both new and traditional payment methods.

“Payments innovation should support and promote broad access and financial inclusion,” Barr said. “Financial inclusion is affected by many factors, but too often the cost of a payment service is prohibitive and represents a barrier that limits access for low- and moderate-income households and small businesses.” 

In other recent news around CBDCs, Federal Reserve Governor Michelle Bowman said Oct. 17 that a digital dollar could pose significant risks and tradeoffs for the financial system. Speaking at a Harvard Law School event in Washington, Bowman said she has yet to see a compelling argument that a CBDC could address frictions within the payment system better than alternatives.