In a significant development highlighting the growing importance of digital currencies, U.S. Federal Reserve Chair Jerome Powell acknowledged stablecoins as a “form of money” and emphasized the need for central bank supervision over them. Powell made this statement during a congressional hearing on June 21, in response to Congresswoman Maxine Waters’ inquiry about regulating stablecoin issuers under the Federal Reserve’s purview.
Waters began the discussion by noting the increasing popularity of stablecoins as an alternative payment method and referred to them as a “new form of currency.” She questioned whether the Federal Reserve considered stablecoins to fall within its regulatory scope, expressing her belief that all institutions handling currency or payments should be subject to similar regulations.
Powell echoed Waters’ concerns and emphasized the central bank’s role in maintaining the credibility of money. He stated, “The ultimate source of credibility in money is the central bank,” implying that stablecoins should not operate independently of regulatory oversight. According to Powell, the Federal Reserve should possess a “robust federal role” in determining the future trajectory of all forms of money, including stablecoins.
The Federal Reserve Chair further warned against leaving the responsibility of overseeing private stablecoin creation solely in the hands of state-level authorities. Powell suggested that this approach could potentially undermine the stability of the monetary system. By advocating for a stronger role for the Federal Reserve in regulating stablecoins, Powell highlighted the importance of central bank supervision and its ability to safeguard the integrity of the financial system.
Stablecoins are a type of digital currency designed to maintain a stable value by pegging their worth to traditional assets such as fiat currencies or commodities. They have gained popularity due to their potential for facilitating fast and low-cost cross-border transactions. However, the rapid growth of stablecoins has raised concerns among regulators about potential risks related to investor protection, financial stability, and money laundering.
While acknowledging the potential benefits of stablecoins, Powell’s statements reflect the Federal Reserve’s cautious approach to emerging financial technologies. The central bank aims to strike a balance between promoting innovation and safeguarding the stability and trustworthiness of the monetary system.
As the regulatory landscape surrounding cryptocurrencies and digital assets continues to evolve, Powell’s remarks signal the Federal Reserve’s recognition of stablecoins as a significant component of the modern financial ecosystem. With the Chair advocating for central bank oversight, it is likely that future regulations will be developed to address the unique challenges posed by stablecoins, ensuring their safe integration into the broader financial framework.
In conclusion, U.S. Federal Reserve Chair Jerome Powell’s assertion that stablecoins should be viewed as a “form of money” and subjected to central bank supervision underscores the need for robust regulatory frameworks in the rapidly evolving world of digital currencies. Powell’s comments highlight the Federal Reserve’s commitment to maintaining the integrity and stability of the monetary system while embracing the potential benefits of innovative payment technologies. As discussions surrounding stablecoin regulation progress, it remains crucial to strike a balance between fostering financial innovation and safeguarding the interests of consumers and the broader economy.
Source: https://azcoinnews.com/fed-chair-jerome-powell-stablecoins-as-a-form-of-money.html