Biden’s election for Fed Vice Chair for Oversight calls for Congressional action on stablecoins

Michael Barr, a law professor and former Ripple Labs advisory board member who was chosen by US President Joe Biden to be vice chairman for oversight at the Federal Reserve, called on US lawmakers to regulate stablecoins to address “financial stability risks.” .

In a confirmation hearing before the Senate Banking Committee on Thursday, Barr said that innovative technologies, including cryptocurrencies, have “some upside potential in terms of economic benefits” but also “some significant risks,” citing the need for a regulatory framework for stablecoins , to prevent this risk of runs. Barr added that the Fed’s potential launch of a central bank digital currency is an issue that requires “a lot more thought and study,” echoing Fed Chair Jerome Powell’s views on due diligence.

Incoming Fed Vice Chairman for Oversight Michael Barr addresses the US Senate Banking Committee on Thursday

According to Barr, “other agencies” within the US government have been responsible for addressing investor protections related to cryptocurrencies. Also attending the same hearing were future Securities and Exchange Commission commissioners — Jaime Lizárraga and Mark Uyeda — who, if confirmed, would serve under Chairman Gary Gensler.

When asked by Massachusetts Senator Elizabeth Warren at the hearing, Barr said he would not work at “a financial services firm” that may have assets under Federal Reserve jurisdiction for four years after his expected tenure at the federal agency. Warren cited recent market volatility, which included TerraUSD (UST) decoupling from the dollar, and then attacked unnamed celebrities for backing certain crypto projects.

“Every investment involves risk — that’s how markets work,” Warren said. “But a market without rules is stealing, and right now, regular investors in stablecoins and crypto don’t get the basic protections available in other financial markets.”

Related: Bitcoin shrugs off Fed volatility as analysts remain divided on yield below $24K

Barr was Biden’s second nomination for Fed Vice Chair for Oversight after Sarah Bloom Raskin’s resignation in March. If approved by the full Senate, Barr’s position at the Fed would allow him to help develop policy recommendations on oversight and regulation for other board members, including Governors Michelle Bowman, Christopher Waller, Lisa Cook and Philip Jefferson, the vice chairman Lael Brainard and Chairman Powell – the last four confirmed in May.

The vice chairman for the Fed’s oversight position has been vacant since Gov. Randal Quarles’ term ended in October 2021.