Speaking publicly for the last time as a member of the Board of Governors of the Federal Reserve System, Randal Quarles urged regulators to exercise restraint on stablecoins.
In a statement prepared for his address at the American Enterprise Institute on December 2, Quarles voiced concern that regulations could hamper innovation in the digital asset space, particularly when it comes to stablecoins. According to the Fed governor, some of the approaches to regulating stablecoins in the November report of the President’s Task Force on Financial Markets are unnecessary, including “limiting the affiliation of wallet providers with commercial entities.” .
“It is one thing to say that a stablecoin issuer itself must be a regulated bank; I think this is probably an overstatement as there are perfectly effective ways for non-banks to satisfy our legitimate regulatory concerns, but there is at least a clear relationship between the existing banking regulatory framework and the specific measures that stablecoin issuers must address. to operate safely, ”said Quarles. “However, it is quite another matter to contemplate that the portfolio providers have to be completely separate from the commercial companies.” The Fed governor added:
“It is not entirely clear what regulatory interest would be favored by such a limitation, which is much more restrictive than what we require for non-digital assets.”
On November 8, Quarles resigned from his position at the Federal Reserve, where he had been serving since 2017. He will remain on the Board of Governors until the end of December, at which point there will likely be three vacant positions for the group of seven. regulators.
During his time at the Federal Reserve, Quarles said federal agencies needed to consider the correct regulatory approach before creating a framework to oversee the crypto market. Ahead of the 2017 bull run, he claimed that large-scale use of cryptocurrencies could pose “serious financial stability issues,” suggesting that the government is partnering with banks to create solutions for digital payments.
“While activities related to digital assets may be novel, regulators do not need to treat these activities differently simply because of the nature of the technology,” Quarles said in his speech Thursday. “We must carefully focus on the unique risks posed by these activities and avoid unnecessarily hampering their promise.”
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US President Joe Biden has yet to announce his elections for the empty Fed seats, but said in November he planned to nominate replacements with a focus on “improving diversity in the composition of the Board.” He has already said that Jerome Powell is his choice to remain Fed Chairman after his first term expires in February, with Governor Lael Brainard serving as Vice Chairman following the departure of Richard Clarida.