According to Federal Reserve Vice Chair for Supervision Randal Quarles, banking regulators in the U.S. should be doing more to monitor cryptocurrency, particularly in light of the growing number of financial institutions looking to integrate it with their services. During a speech at the Brookings Institution on Monday, Quarles described cryptocurrency as a “challenge to supervision,” because “supervisors may not have sufficient understanding of emerging technologies, business models, and investor and consumer protections, all of which can affect safety and soundness.”

Federal Reserve Vice Chair for Supervision Randal Quarles warned that cryptocurrency is a “highly speculative” investment that requires regulators to pay closer attention to the rapidly evolving technology. Speaking to a group of bankers at the Federal Reserve Bank of Atlanta, Quarles said that the federal banking agency “will be examining the extent to which digital currencies may pose risks to financial stability,” adding that “some market participants may find that it is more profitable to create a business that is close to the technology rather than the business of banking itself.”

A senior Federal Reserve official has urged bank regulators to pay more attention to cryptocurrencies and stablecoins. His comments follow the announcement by a number of major banks that they will offer their customers products based on cryptocurrencies, including bitcoin.

Banking regulators need to pay more attention to cryptocurrencies, says Fed chief

Randal Quarles, the Federal Reserve’s Vice Chairman for Oversight, spoke about cryptocurrencies last week at a conference hosted by the Options Clearing Corporation. He urged bank regulators to pay more attention to stablecoins and cryptocurrencies.

Quarles joined the Board of Governors of the Federal Reserve System in 2017 and was appointed to the Board on the 13th. In October of the same year, he was sworn in as vice president in charge of supervision. He is also chairman of the Financial Stability Board (FSB).

His comments follow the announcement by several US banks, such as Morgan Stanley and Goldman Sachs, that they would offer their wealthy clients access to investment products based on cryptocurrencies, including bitcoin.

According to Quarles, the rise of cryptocurrencies and stablecoins is one of the most interesting developments in the financial markets. He noted, however:

I think the depth of the political discussions on these issues was not as deep as I would have liked.

The unstoppable advance of technology is a great opportunity, but also a challenge for the supervision of the financial system, he stressed.

The Fed’s top regulator admitted that policymakers have spent most of the past year fighting the Covid 19 pandemic and haven’t had much time to tackle regulation of cryptocurrencies.

Last year, people had many other concerns when these issues became more pressing, and I understand why, he said, adding:

I think we need to think hard about the problems with stable currencies in the next year or two.

Do you think the Fed should pay more attention to cryptocurrencies? Let us know your comments in the section below.

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