The Federal Reserve Board has announced that Michael S. Barr will resign from his position as vice chairman for oversight.
In a statement, Barr said he did not want a potential dispute over the position in the near future to distract from the Fed’s “mission.”
“The position of Vice Chairman for Oversight was created following the global financial crisis to create greater responsibility, transparency and accountability for the Federal Reserve’s supervision and regulation of the financial system. The risk of a dispute over position could be a distraction from our mission. In the current environment, I have decided that my role as governor would allow me to be more effective in serving the American people.”
Barr’s resignation comes less than two weeks before the inauguration of pro-crypto President Donald Trump.
In 2023, Barr warned of the “special risks associated with stablecoins” during a speech at the Peterson Institute for International Economics, Washington, DC, advocating stricter regulation of the asset class.
Barr said,
“Stablecoin issuers try to have the same features as federally insured bank deposits, but they don’t. Stablecoin issuers represent that their obligations can be redeemed upon demand at par, dollar for dollar. In fact, however, the assets backing the liability may fluctuate in value. In contrast, the banks we regulate are well protected against bank runs through a robust range of supervisory requirements.
Consider the consequences if a stablecoin that is not subject to appropriate supervision and regulation were to be adopted as a widespread means of payment, which is the goal of some stablecoin developers. Stablecoins have the potential to scale quickly due to network effects. An unregulated, unaudited, deposit-like asset could cause massive disruptions not only to financial institutions, but also to people who might rely on the currency if it were to become widely accepted.
We must learn from the past to ensure that we do not allow new forms of unregulated private money that are subject to classic forms of run risk, and with associated spillovers and systemic implications for households, businesses and the wider economy .’
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