The top US bank regulator says that crypto tokens are unlikely to replace traditional currency and that banks should proceed cautiously when they experiment with the asset class.
“Because crypto assets have proved to be so volatile, they are unlikely to grow into money substitutes and become a viable means to pay for transactions,” Federal Reserve Vice Chair for Supervision Michael Barr said on Wednesday in remarks prepared for a DC Fintech Week event. “Banks looking to experiment with these new technologies should do so only in a controlled and limited manner.”
Bank of New York Mellon announced on Tuesday the debut of a digital-asset platform in the US, with “select clients” using it to hold and transfer Bitcoin and Ether. He didn’t mention any specific projects in his remarks.
Barr said he was concerned about the “novel risks” associated with banks’ involvement in crypto. He also said he also believes so-called crypto stablecoins could eventually pose a risk to financial stability and that regulators need to put in guardrails before their adoption is more widespread.