Fed's Quarles says regulatory overkill could stifle stablecoin innovation

  • In Politics
  • 2021-12-02 16:13:24Z
  • By Reuters

By Pete Schroeder

WASHINGTON (Reuters) -Randal Quarles, the former regulatory chief of the Federal Reserve, said on Thursday that U.S. regulators may "unnecessarily" hamper innovation around so-called stablecoins if they pursue recent recommendations put forward by a Biden administration working group.

Quarles, who will leave the Fed's Board of Governors at the end of the month, said regulators must show "reasoned constraint" on monitoring stablecoins, which are digital currencies whose value are pegged to traditional assets like the dollar. He added that banks should be allowed to engage with them once certain concerns around transparency, stability and consumer protection are met.

"It is clear that there is a strong demand for these assets among bank customers, and well-regulated banks should be allowed to engage in activities regarding these assets," he said in a virtual appearance at an American Enterprise Institute event in Washington.

Quarles specifically cited a recommendation that any stablecoin issuers or "wallet providers" have limited access to other commercial entities, calling it needlessly stricter than rules for nondigital assets.

The President's Working Group on Financial Markets published a report in November calling on Congress to pass a new law to apply bank-like scrutiny to stablecoin providers.

In his final speech at the Fed, Quarles laid out a series of recommendations for the central bank following his exit. President Joe Biden has yet to nominate his replacement.

For example, Quarles also said the Fed should consider easing its "globally systemic" capital surcharge for the nation's largest banks, particularly as regulators move to finalize added global capital restrictions known as "Basel III."

He said the Fed's plan to finalize those new rules would come after his exit from the U.S. central bank, and said there will be "little justification" for keeping the G-SIB surcharge at its current high level once it's done.

He also argued the Fed should consider averaging the results of its annual stress test of bank finances over several years to result in a more consistent capital level, and that the central bank needs to address "perverse implications" of current leverage requirements that could discourage banks from holding safe assets in times of stress.

(Reporting by Pete SchroederEditing by Paul Simao)


More Related News

'Every indication' Putin plans force by mid-February: US
  • World
  • 2022-01-26 14:31:36Z

The United States believes that Russian President Vladimir Putin remains poised to use force against Ukraine by mid-February despite a pressure campaign to...

Where Is Germany in the Ukraine Standoff? Its Allies Wonder.
Where Is Germany in the Ukraine Standoff? Its Allies Wonder.

BERLIN - The United States and its NATO allies are moving to bulk up their military commitments in the Baltics and Eastern Europe as the standoff with Russia...

Biden says he
Biden says he'd consider slapping Putin with personal sanctions if Russia invades Ukraine
  • World
  • 2022-01-26 09:37:23Z

Russia has warned that sanctioning Vladimir Putin would lead to US-Russia ties being cut. Leaked documents suggest Putin has secret assets abroad.

Republicans look to capitalize on infrastructure funding they voted against
Republicans look to capitalize on infrastructure funding they voted against

Several House Republicans are praising parts of the recently enacted funding measure they see as beneficial to their districts after they bashed the overall ...

Inflation-fighting Fed likely to flag March interest rate hike
Inflation-fighting Fed likely to flag March interest rate hike
  • US
  • 2022-01-26 06:10:45Z

The Federal Reserve is expected on Wednesday to signal plans to raise interest rates in March as it focuses on fighting inflation and sets aside, at least...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Politics