The Federal Reserve’s top bank regulator on Thursday tried to send something of an olive branch to the crypto industry. In a speech in Washington, Fed Vice Chairman for Bank Supervision Michael Barr said that the Fed and other regulators were working to consider “whether and how” certain crypto-asset activity can be conducted in a manner that is consistent with safe and sound banking.
The key point is that innovation must be balanced with guardrails, Barr said, in a talk at the Peterson Institute for International Economics. Barr’s conciliatory tone is somewhat in contrast with written regulatory guidance to banks. “The Fed is using various channels to send a message to crypto firms and banks: Stay away from each other,” said Ian Katz, managing director of Capital Alpha Partners, in a recent note to clients. “The tone reflects regulators’ growing distrust of the industry and a desire to ensure that crypto’s woes don’t spread to the traditional banking sector,” Katz added. In his speech, Barr said that the Fed has not lost sight of the “potential transformative effect” that these technologies could have on the financial sysgtem. Regulation should not lock in the power of incumbents or stifle innovation, he said. The technology underlying crypt …