The use of stablecoins has recently come under increased scrutiny from the United States central bank. In a move to strengthen its supervision of banks involved in stablecoin activity, the Federal Reserve announced new guardrails in August.
This heightened attention on stablecoins is driven by concerns that private entities are essentially creating private money, which could pose risks to the stability of the financial system.
Michael Barr, vice chair of the Federal Reserve for Supervision, has called for a robust federal framework to regulate stablecoins. He emphasized the importance of well-regulating private money, especially those stablecoins that are linked to fiat currencies, such as the US dollar, as they inherently rely on the trust of the central bank.
Barr’s Assertion: Stablecoins Borrow The Trust Of The Fed
During a recent speech at DC Fintech Week, Barr reiterated his stance on stablecoins, stating that “private money needs to be well regulated.” He explained that
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