Fed vice chair Barr gives update on CBDC research, plugs stablecoin legislation

The vice president of the Federal Reserve Bank of the United States spoke at the Federal Reserve Bank of Philadelphia fintech event on September 8 about the role of the central bank in financial innovation. Investigation and supervision was the short answer and a nod to the FedNow service.

Along with the standard disclaimer that it doesn't make decisions without congressional authorization, Barr provided an overview of the Federal Reserve's "current approach" in investigating central bank digital currency (CBDC). He characterized it as “basic research […] which could support a CBDC payments backbone, or for other purposes in the existing payments system.”

Specifically, Barr mentioned the system architecture for recording transactions and ownership in ledgers and tokenization models. FEDS Notes publication On the same day, CBDC Wholesale also emphasized that “the technology associated with tokenized platforms is not incompatible with the functioning of existing central bank money as a settlement asset.”

Barr reminded his audience of the Federal Reserve's Novel Activities Supervision Program, which presented last month. That dedicated team of supervisors can provide information that would enable a federally supervised bank to obtain a “written supervisory no objection” to its new activities involving stablecoins, among other things. Barr said this activity aligns with Office of the Comptroller of the Currency (OCC) policies. described in interpretive letters 1174 and 1179.

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Barr said that strong federal supervision of stablecoins, which is envisioned in the OCC letters, is in the interest of the Federal Reserve, as a dollar-pegged stablecoin "borrows the trust of the central bank." He expressed his gratitude for current legislative efforts:

"If unregulated federally regulated stablecoins were to become a widespread means of payment and store of value, they could pose significant risks to the financial stability, monetary policy, and payments system of the United States."

The Federal Reserve equipped big banks, regional banks, community banks and credit unions with rails for widely accessible 24-hour instant payments through the FedNow service, introduced in July, Barr said. He added that the current volumes of the service are small, but It corresponds to the depository institutions. for the service to be available.

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