Fed’s Barr Says Crypto Is Unlikely To Become a Fiat Substitute

The adoption of crypto has been going up at an alarming rate. Digital assets have been enjoying a newborn interest from investors and users from around the world.

Cryptocurrency has harnessed notable attention due to its anonymity. Users’ ability to send and receive money in a fast way with minimal fees is also its key feature. Several crypto enthusiasts envision a crypto realm where the payment system is decentralized. Many even dream of a world where fiat currencies are replaced by crypto.

However, Michael Barr,  Federal Reserve Vice Chair for Supervision, believes that cryptocurrency is unlikely to replace fiat.

Barr warns banks to proceed cautiously with crypto

Barr believes that cryptocurrencies will not replace fiat currencies and advises banks to exercise caution when dealing with cryptocurrencies.

“Because crypto assets have proved to be so volatile, they are unlikely to grow into money substitutes and become a viable means to pay for transactions.” “Banks looking to experiment with these new technologies should do so only in a controlled and limited manner,” Michael Barr said on Wednesday.

He highlights that he has worries and concerns about the risks of banks dealing with cryptocurrencies. Barr mentioned that stablecoins might possibly pose a financial stability risk. He also advised the regulators to control them before the adoption soars uncontrollably.

These remarks from Barr come during a time when banks and other financial institutions are diving into the crypto realm. Traditional financial institutions are trying to cash in on the opportunity with cryptocurrency’s soaring adoption.