Speaking publicly for the last time as a member of the Board of Governors of the Federal Reserve System, Randal Quarles urged regulators to exercise restraint on stablecoins.
In a prepared statement for his speech at the American Enterprise Institute on Dec. 2, Quarles expressed concern that regulations could hamper innovation in the digital asset space, particularly when it comes to stablecoins. According to the Fed governor, some of the approaches on stablecoin regulation from the President’s Working Group on Financial Markets’ November report are unnecessary, including “limiting wallet providers’ affiliation with commercial entities.”
“It is one thing to say that a stablecoin issuer itself must be a regulated bank — I think that is probably overkill, as there are perfectly effective ways for nonbanks to meet our legitimate regulatory concerns, but there is at least a clear relation between the existing framework of bank regulation and the specific measures that stablecoin issuers must address to operate safely,” said Quarles. “It is, however, quite another thing to contemplate that wallet providers may need to be completely separated from commercial firms.” The fed governor added:
“It is not at all clear what regulatory interest would be furthered by such a limitation, which is much more restrictive than we require for nondigital assets.”
On Nov. 8, Quarles resigned his position at the Federal Reserve where he had been serving since 2017. He will remain on the Board of Governors until the end of December, at which point there will likely be three open seats for the group of seven regulators.
During his time at the Fed, Quarles said that federal agencies needed to consider the right regulatory approach before creating a framework to oversee the crypto market. Prior to the 2017 bull run, he claimed that wide-scale usage of cryptocurrencies could pose “serious financial stability issues,” suggesting that the government partner with banks to create solutions for digital payments.
“While digital asset-related activities may be novel, regulators need not treat these activities differently simply because of the nature of the technology,” said Quarles in his Thursday speech. “We must focus with care on the unique risks posed by these activities and avoid unnecessarily impeding their promise.”
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U.S. President Joe Biden has not yet announced his picks for the Fed’s empty seats, but said in November he planned to nominate replacements with a focus on “improving the diversity in the Board’s composition.” He has already said Jerome Powell is his pick to remain Fed chair after his first term expires in February, with governor Lael Brainard to serve as vice-chair after the departure of Richard Clarida.