Top Fed official says he is 'deeply concerned' about stablecoins without federal oversight

Top Federal Reserve official Michael Barr said he is "deeply concerned" about the issuance of stablecoins without strong federal oversight. 

"If non-federally regulated stablecoins were to become a widespread means of payment and store of value, they could pose significant risks to financial stability, monetary policy, and the U.S. payments system," the vice chair of supervision said at a fintech conference on Friday. 

The central bank has increased its focus on stablecoins and last month announced new guardrails to strengthen its supervision of banks involved in stablecoin activity. 

"It is important to get the legislative and regulatory framework right before significant risks emerge," Barr said. "We appreciate the work Congress has been doing on this important issue and look forward to further engagement to ensure that there is a robust federal framework for all stablecoins."

Democrats and Republicans in the House Financial Services Committee have battled over how stablecoins should be regulated in an effort to create a federal framework. That committee advanced a regulatory framework for payment stablecoins in July, although Rep. Maxine Waters, D-Calif, has criticized the bill over a provision that would allow state regulators to approve stablecoin issuance without Federal Reserve input.

Long way from a CBDC

Barr implied on Friday that the Federal Reserve was not close to developing a CBDC. The central bank published a report last year to examine the pros and cons of a potential CBDC. 

"Of course, investigation and research are very different from decision making about next steps in terms of payments system development, and we are a long way from that," Barr said.

'The Federal Reserve has made no decision on issuing a CBDC and would only proceed with the issuance of a CBDC with clear support from the executive branch and authorizing legislation from Congress,” he added.