A top Federal Reserve official on Wednesday laid out some of the major questions U.S. financial regulators will need to tackle as they figure out how to best monitor the rapidly changing cryptocurrency landscape.
Cryptocurrencies are capable of "potentially much broader use" now, thanks in part to the introduction of so-called "stablecoins," which are pegged to more traditional currencies, Fed Vice Chair for supervision Randal Quarles said on Wednesday.
"There is enough that has happened that we can in a relatively short space of time come up with some joint views," said Quarles.
His comments come a day after he said the Fed, the Federal Deposit Insurance Corporation and other regulators were in a "sprint" to develop a framework for monitoring digital currencies.
"Financial institutions are now holding crypto assets. What will the capital charge for those assets be" Quarles said during a virtual conversation organized by the Brookings Institution. "What is our supervisory guidance for an operationally safe way to handle some of these partnerships"
Fed officials are speaking more openly about their efforts to explore the potential development of a digital dollar. Fed Chair Jerome Powell said last week that the central bank will release a discussion paper this summer on the pros and cons of a U.S. digital currency.
On Monday, Fed Governor Lael Brainard highlighted the financial risks that could arise if the digital currency universe becomes too fragmented and said a U.S. CBDC could provide a safer alternative to privately-issued stablecoins.
"A predominance of private monies may introduce consumer protection and financial stability risks because of their potential volatility and the risk of run-like behavior," she said.
(Reporting by Jonnelle Marte; Additional reporting by Howard Schneider and Ann Saphir; Editing by Sam Holmes) ((Jonnelle.Marte@thomsonreuters.com; +1 646 978 0908;))