In a speech at the Financial Stability and FineTech Conference, Vice Chairman of Supervision, Randal K. Quarles made it clear that he had made the Federal Reserve (Fed) position on cryptocurrencies. Instead, Quarles suggests that government partners with current banking systems can create solutions in response to digital payment wave.
The potential effects of digital currencies have been cautioned by the regulator as in crisis times. Recalling takes place on major banks, and for reasons that have been set up by the Federal Reserve, Quarles made clear that the lack of oversight on Cryptocurrencies should be destabilized for financial institutions.
“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.”
Banks will bring the stability
The supervisor has made clear that he warns against the decentralized digital currencies, just as alert to decentralized digital currencies, many users need to switch to such decentralized systems, banks may lose the liquidity needed for loan money, make payments, etc.
Instead, they have suggested that payment structures within the banking system have improved greatly from a technical perspective. Furthermore, as banks continue to seek new innovation to improve payment method, the partner continues with the Fed to produce stability and security.
“Working cooperatively, private-sector participants and central banks can incorporate innovation that may be able to strike the right balance of improving the technical networks without adversely generating financial stability concerns.”