The Federal Reserve Board “has a strong interest in ensuring that any stablecoin offerings operate within an appropriate federal prudential oversight framework, so they do not threaten financial stability or payments system integrity,” Vice Chair for Supervision Michael S. Barr said in prepared remarks today.

In a speech before the Federal Reserve Bank of Philadelphia's Seventh Annual Fintech Conference, Barr reviewed the Fed’s role in supervising new innovations in the payments system before turning his attention to stablecoins, which he called an “innovation that crosses both payments provision and bank safety and soundness issues.”

Barr told the conference attendees that he is “deeply concerned” about stablecoins—digital tokens whose value is pegged to a government-issued currency—without strong federal oversight.

Since such an asset is also used as a means of payment and a store of value, “it borrows the trust of the central bank,” he said. As such, “the Federal Reserve has a strong interest in ensuring that any stablecoin offerings operate within an appropriate federal prudential oversight framework, so they do not threaten financial stability or payments system integrity.”

“If non-federally regulated stablecoins were to become a widespread means of payment and store of value, they could pose significant risks to financial stability, monetary policy and the US payments system,” he said.

The Fed recently launched a program to supervise novel activities in the banks it oversees. Novel activities include activities that involve crypto-assets and distributed ledger or "blockchain" technology.

To gain a broad overview of cryptocurrency and blockchain, attend the Foundation for Accounting Education's CFO Series: Cryptocurrencies for the CFO: Explain Blockchain Webinar on Oct. 13.