Fed Vice-Chair Pick & Ex-Ripple Advisor Advocates For Clear Crypto Guidelines

May 20, 2022 11:23 am Comments

Michael Barr is an ex-Ripple advisor that was recently nominated by President Joe Biden to be the Fed’s Vice Chair which is responsible for overseeing the financial sector of the United States.

Barr made some comments on the crypto industry in front of the Senate during the hearing last week.

In particular, he shared some statements when he was asked by the committee about his opinion on the recent events that transpired within the crypto industry.

Responding to the question, Barr stated that stable coins do have some financial stability risks and that it should be encouraged to create clear guidelines to help address those risks.

The clear focus point is investor protection and that regulation in this regard needs to be clear without any possibility for open interpretation.

CoinDesk reports:

“In issues such as stablecoins there could be financial stability risks, and I think it’s quite important that Congress and regulatory agencies wrap their arms around those financial stability risks and regulate,” he said.

If confirmed by the Senate, the former senior official in the U.S. Department of the Treasury will be the Fed’s next vice chairman for supervision and will occupy a key role in what happens next with stablecoins.

He’ll also have input on the Fed’s decision about whether to launch a digital dollar, which he said should have sign-off from Congress and the Biden administration before the Fed makes a decision.

The Thursday hearing also weighed the confirmations of Jaime Lizárraga and Mark Uyeda to join the Securities and Exchange Commission, where Chairman Gary Gensler has been occupying a major role in the government’s response to the rapid growth of the crypto industry.

Other things that were brought up during the Senate hearing was the fact that the SEC had required Coinbase to update their policies for bankruptcy protection.

Specifically, this forced Coinbase to mention in its SEC filing that all customer assets on the exchange would not be protected in the case of a bankruptcy.

In other words, the customers’ crypto would be used as collateral in order to bail Coinbase out if the company ever went bankrupt which is a huge risk for crypto holders.

As a result, there was much dispute over this as crypto was supposed to be designed to give the owners of the crypto complete control over their digital assets.

CoinDesk concludes:

That custody question has influenced the Biden administration to press Congress to require crypto exchanges segregate their customers’ funds from their own, CoinDesk reported earlier.

Sen. Elizabeth Warren (D-Mass.) raised questions about cryptocurrencies and investor protections to all three nominees, pointing to last week’s TerraUSD meltdown: “Turns out, [UST] was not so stable. If you put $1,000 in Terra 10 days ago, you’d get back $90.”

“Online investor forums have been flooded with harrowing posts” from investors who lost their life savings, she said, adding that it “smells a lot like 2008.”

Even asset-backed stablecoins like tether (USDT) briefly lost their peg, she said, before asking if stablecoins are providing auditing disclosures about their reserves. Uyeda said they are not.

As of now, it seems likely that stable coin regulations may come soon, but the most important thing is that the regulation guidelines must be clear and concise so that crypto firms are not unjustly targeted by enforcement agencies.

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