Jerome Powell, the US Federal Reserve chair, announced that stablecoins could be an efficient, useful, and consumer-serving element of the entire financial system only if they are properly regulated. He hinted that although the government agencies should consider regulating and monitoring developments taking place in the cryptocurrency field, he did not see cryptos as a concern for financial stability in the US market.
While addressing Michael Derby’s question on cryptocurrencies on Tuesday, the Fed chair followed the conclusion of November’s report by the Working Group on Financial Markets of the President. The proposal from that report stated that users of stablecoins should be answerable to an ‘appropriate federal oversight’ similar to the regulations of the banks. This legislation was urgently required for addressing the risks.
Powell added that even though Stablecoins are not acting useful, they have a great capacity to scale, especially if Stablecoins are associated with a popular tech network. With stablecoin, one can enjoy a payment method that was instantly systemically essential that did not have protections and appropriate regulation. The public depends on the Fed and the government to ensure that the method of payment is reliable and secure.
Jerome Powell seems to be supporting the recent position of the Biden administration on cryptocurrencies prior to the next chair’s Senate confirmation hearing. Powell has served on the board of governors of the Fed since 2012 and as a Fed chair since 2018. He is chosen by the US President to serve the country in the same chair till 2026.
Although the chair admitted that cryptocurrency is not a concern for financial stability for the economy at present, Powell still considered cryptocurrencies in the form of speculative assets to be risky since they are not supported or backed by any agency.
Stablecoins are similar to fiat market funds, just like traditional bank deposits. However, they are not yet included in the regulatory space, and that it would be appropriate for Stablecoins to be regulated. Since both cryptos and fiat have the same functions and activities, they should be regulated in the same way.