Barr: Fed program on novel activities will continue to grow

The Federal Reserve’s new program to supervise novel, technology-driven activities in the banks it oversees will continue to grow as new technologies emerge, Fed Vice Chair for Supervision Michael Barr said.

Barr Remarks: Speaking in Philadelphia, Barr said the program is focused on crypto-assets, distributed ledger technology, and complex technology-driven bank partnerships with nonbank fintechs. Citing concerns with dollar-pegged stablecoins, Barr said the program—which the Fed announced last month—is designed to provide clarity as well as timely and relevant feedback to the institutions it supervises.

Fed Policy Statement: The Fed said in August that its announcements are in line with its January policy statement clarifying that its regulatory limitations apply to both insured and uninsured depository institutions. That policy statement also said crypto activities—such as issuing stablecoins on decentralized networks—are “highly likely to be inconsistent with safe and sound banking practices.”

CBDC Research: Barr also said that while the Fed continues to conduct basic research in emerging technologies that might support a central bank digital currency, it has made no decision on issuing a CBDC. In a new paper from the Fed, researchers said a new settlement asset in the form of central bank money is not essential for a tokenized wholesale payment system.

ICBA View: ICBA has repeatedly called on policymakers to ensure new policies directed at the crypto sector fully reflect its risks, to prioritize research on the specific effects of digital assets on community banks and their customers, and to oppose the formation of a U.S. central bank digital currency.