- Jerome Powell the U.S. Federal Reserve sees “payments stablecoins as a form of money” that should be robustly regulated by the central bank.
- The Fed Chair also said the technology behind this class of cryptocurrencies should have strong federal oversight.
- Powell also remarked that cryptocurrencies, like Bitcoin, have “staying power” in the U.S. economy.
Federal Reserve Chairman Jerome Powell has acknowledged that Bitcoin appears to have “staying power” as an asset class in the United States. He also emphasized the importance of stablecoins as a form of money saying the U.S. central bank should play a “robust federal role” in overseeing this class of crypto assets.
Need for Strong Oversight of Stablecoins
Speaking on Wednesday during a congressional hearing held on monetary policy by the Republican-led House Financial Services Committee, Fed Chair Jerome Powell said that stablecoins should be subject to robust regulation by the central bank.
In his comments, Powell acknowledged that stabecoins form a sizable part of the overall crypto market that regulators are trying to formulate laws for.
“Stablecoins are cryptocurrencies whose value is pegged to a reference asset, commonly fiat currencies such as the U.S. dollar or the Euro.”
During the hearing Congresswoman Maxine Waters (D-CA) asked a question which raised concerns about the potential for stablecoin issuers to register directly with states, bypassing federal oversight – an option currently included in the draft legislation on stablecoins..
The Fed chair responded by saying that the technology behind this class of cryptocurrencies, where tokens pegged to the price of a sovereign currency like the U.S. dollar and issued by private companies—should have strong federal oversight.
Powell said:
“We do see payments stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank. We believe that it would be appropriate to have quite a robust federal role in what happens in stable coins going forward.”
Powel also pointed out that the regulator recognizes the importance of regulating tokens backed by the U.S. dollar adding that “leaving [the Fed] with a weak role and allowing a lot of private money creation at the state level would be a mistake.”
The Fed official was echoing his previous views stablecoins. In 2021, while speaking before Congress , Powell said that stablecoins could be a significant part of the “payments universe,” as opposed to any other type of crypto asset. He went on to suggest that stablecoins should be regulated similar to money market funds and bank deposits.
However, progress on stablecoin regulation has been slow, with several bills on the topic stalling out.
Crypto has “Staying Power”- Powell
During the hearing, Congressman Warren Davidson (R-OH) stated that the global cryptocurrency market cap stands at about $1.17 trillion. He then asked Powell: “Do you acknowledge that this asset class has staying power in the U.S. economy?” The Fed chairman replied:
“It appears to have some staying power.”
Powell then noted that the crypto market cap was a lot higher over a year ago to which Rep. Davidson replied saying that the digital asset space experiences “volatility in large measure due to the lack of legal clarity.” Davidson added that the committee is committed to changing this noting that several bills are coming out, including one on stablecoins.
