Michael S Barr: Supporting innovation with guardrails - the Federal Reserve's approach to supervision and regulation of banks' crypto-related activities

Remarks by Mr Michael S Barr, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, at the Peterson Institute for International Economics, Washington DC, 9 March 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
13 March 2023

I'm here today to discuss what we have learned from the recent turmoil in the crypto sector and what role supervision and regulation should play in helping banks manage their engagement with the sector and the innovative technologies that support it. Despite recent events, we have not lost sight of the potential transformative effect that these technologies could have on our financial system. And we need to be careful lest regulation lock in the power of incumbents or stifle innovation. But the benefits of innovation can only be realized if appropriate guardrails are in place. I am going to talk about how we are working to provide clarity to the banks we supervise about what we have learned and about our supervisory expectations. I will wrap up by sharing some thoughts on stablecoins.

It isn't hard to find evidence for the need to discuss crypto, but let me start with a recent personal experience. Last month, I visited the Mississippi Delta to talk about financial inclusion and community development, and I spent a morning talking with a group of college students. When I asked, it turned out that most of the students I met owned some crypto-assets. This surprised me because in my experience as a professor, most college students are usually strapped for cash. What didn't surprise me is that many of those who said they owned crypto-assets also said they had lost money, and they weren't very happy about that.