Chair of Federal Reserve Jerome Powell told the House of Representatives today that there have to be more strict regulations needed for stablecoins in similarity to bank deposits or money market funds.
Powell is the 16th Chair of the U.S Federal Reserve, holding office as the Chair of the Federal Reserve Board of Members since Feb 2018. He was nominated to the Board of the Federal Reserve in 2012 by President Obama. Later on, designated as the Chair of the Federal Reserve by President Trump.
The House of Representatives Rep (of OH) Anthony Gonzalez asked Powell specifically about Tether, which is now considered the most worthy stablecoin. Tether claims each coin is supported by a dollar but that has been proven to be wrong. However, it is backed by commercial debts or paper.
Mostly, these assets are very liquid however, that wasn’t the case during the recent financial crisis, Powell stated. He explained that: “People will want their money once the market disappears. That’s pretty simple. These are economic activities that are very much similar to money market funds or bank deposits. Therefore, require regulations in similar ways.”
If Stablecoins want to be a part of the payment world, then we need to put laws and regulations in place. As a framework of regulations doesn’t exist for stablecoins at the moment, Powell noted.
He also shared his analysis that in the future he doesn’t see such volatile crypto assets being a part of the payment world.
According to the Monetary Policy Report which was released last Friday, Crypto assets were also mentioned. They called out that there was hardly a single sentence in the context of “risky assets”, which says:
“The Surge in the prices of a variety of crypto-assets also reflects increased risk appetite, in part.”
Another House of Representatives Rep of MA, Stephen Lynch stated that CBDC (Central Bank Digital Currency) would reduce the number of cryptocurrencies being launched.
“If you had a digital U.S currency, you would not have needed stablecoins, nor would you need cryptocurrencies. I think that is one of the strongest arguments in its favor.”
Powell also indicated that a paper that concentrates on the risks and gains, linked with a CBDC will be released sometime in September. Powell was also further asked a question about the peaked inflation rates. He replied that “the rates have distinctly increased and will most likely remain towering in the upcoming months before they become moderated.”
What do you think? Do all lawmakers, masters-of-coin, like Jerome Powell himself, senators, legislators of countries around the world make sense? Are crypto assets so liquid and volatile or do the governments, financial institutions, and law enforcement authorities sincerely want to rid their people of an invisible threat that is slowly surfacing from the ocean.