According to Federal Reserve Chairman Jerome Powell, stablecoins should be regulated more strictly, similar to money market funds or bank deposits.
Powell addressed the House of Representatives today.
In response to Rep. Anthony Gonzalez’s questions about Tether, the world’s most valuable stablecoin at the moment, Powell stated that he agreed with him (R-OH).
Tether initially stated that each coin was backed by a dollar; however, this has since been established to be false, and the coin is now primarily backed by commercial paper or debt.
Mr. Powell stated that those assets are, for the most part, extremely liquid; however, he noted that this was not the case during the recent financial crisis.
He continued, saying the following: “The market simply vanishes into thin air.”
And it is at this point that individuals will begin to seek payment from you.
According to the author, these economic activities, like bank deposits and money market funds, require regulation on a par with those financial instruments.
Powell continued by stating that in order for stablecoins to become a part of the payment ecosystem, regulations must be implemented, as there is currently “no regulatory framework for stablecoins, really.”
He believes that volatile crypto assets will not be accepted as payment in the near future, as previously reported by the Financial Times.
The Monetary Policy Report, which was released last Friday and contained 75 pages of information, included a mention of cryptocurrencies.
The protesters singled out one sentence in particular, which was mentioned in the context of “risky assets”:
As he notes, “the rise in the prices of a variety of crypto-assets reflects an increase in risk appetite.”
Representative Stephen Lynch (D-MA) stated in an interview with the Boston Globe that a Central Bank Digital Currency (CBDC), or Central Bank Digital Currency, would aid in reducing the number of cryptocurrencies launched:
According to Powell, if there were a digital equivalent of the US dollar, stablecoins and cryptocurrencies would cease to exist.
That, in my opinion, is one of the most compelling arguments in favor of it.”
Powell expects to publish an article in September examining the benefits and drawbacks of establishing a CBDC in the United States.
In response to a second question about the United States’ current record inflation rates, he stated that they have “significantly increased and are likely to remain elevated in the coming months before moderating.”
Powell reiterated his previous statements that the increase is only temporary and that the market will most likely return to pre-pandemic levels once certain markets, such as used cars, have returned to pre-pandemic levels.
Additionally, Powell stated that the increase is temporary.
Powell will testify before the Senate Banking, Housing, and Urban Affairs Committee on Wednesday regarding the financial crisis.
