Bitcoin, Ethereum and other major cryptocurrencies remain stagnant despite payments giant Visa dropping a crypto bombshell this week (while Binance's CEO issued a hack warning).
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Bitcoin price has returned to pre-BlackRock levels
Now, senior Federal Reserve official Michael Barr has warned that he is "very concerned" about the $120 billion stablecoin market that has exploded in recent years and is now tied to the price of bitcoin, ethereum and other major cryptocurrencies.
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"If federally regulated stablecoins become a widespread form of payment and store of value, they could pose significant risks to financial stability, monetary policy and the US payments system," said Barr, the Federal Reserve's vice chairman for oversight. At the Federal Reserve Bank of Philadelphia's fintech conference, adding that he was "very concerned" about stablecoins like Tether and USDC Circle.
Which operates without strong federal oversight.
The stablecoin market has grown to about $120 billion in recent years, with Tether and USDC, each of which has close ties to Bitcoin, Ethereum, and other cryptocurrency markets, dominating the space.
US lawmakers are struggling to pass rules governing stablecoins and keep pace with regions in Europe and Asia, while Democrats and Republicans on the House Financial Services Committee battle over the independence state regulators should have.
"It is important to get the legal and regulatory framework in place before significant risks arise," Barr said. "We appreciate the work Congress has done on this important issue and look forward to greater commitment to providing a strong federal framework for all stablecoins."
In testimony before the House Financial Services Committee in June, the Fed chairman called for strong Fed oversight of stablecoin regulation, saying, "We think it would be appropriate to have some sort of federal role."
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Meanwhile, the prices of Bitcoin, Ethereum and other major cryptocurrencies are experiencing a long-term "downtrend" that has reversed Bitcoin price gains over the summer.
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