In a speech during the Financial Stability and Fintech Conference, Vice Chairman of Supervision, Randal K. Quarles made it clear that the Federal Reserve’s (Fed) position on cryptocurrencies is one of extreme caution. Instead, Quarles suggests that the government partner with current banking systems to create solutions in response to the digital payment wave.
The warning came as the regulator considered the possible implications of digital currencies during times of crisis. Recalling runs on major banks, and the reasons for founding the Federal Reserve, Quarles made it clear that the lack of supervision over cryptocurrencies should destabilize financial institutions. He said:
“While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage. Risk management can act as a mitigant, but if the central asset in a payment system cannot be predictably redeemed for the US dollar at a stable exchange rate in times of adversity, the resulting price risk and potential liquidity and credit risk pose a large challenge for the system.”