Fed President Powell says the crypto requires new rules, citing “threats” to the US financial system

Fed President Powell says the crypto requires new rules, citing “threats” to the US financial system

Federal Reserve Chairman Jerome Powell stressed on Wednesday that technological transformation is here to stay in the financial sector and that new regulations will be needed.

Powell revealed an insight into how the United States will manage the market during a presentation at the Bank of Ukraine’s International Settlements Bank’s Innovation Summit on digital currencies.

The digital age has not been taken into account when establishing our current regulatory structures, a Fed official said.

“There will be a revision of existing laws and regulations, as well as the creation of completely new rules and structures, if central banks, stable coins and digital currencies are to be implemented,” he said during a roundtable on CBDCs at the BISI summit.

Is there a threat?

Powell noted that new forms of digital money, such as cryptocurrencies and stable coins, pose a threat to the US financial system and will require the adoption of additional consumer protection measures.

Powell reaffirmed his position that cryptocurrency should adhere to the premise of “same activity, same regulation”.

He proposed regulating the issuers of stable chickens, such as banks, in October 2021.

“Stablecoins work similarly to money market funds. They are similar to bank deposits … and it is reasonable to control them similarly, the same activity, the same regulation “, he concluded.

Powell says DeFi can improve the financial sector

Nevertheless, the Fed president acknowledged that distributed technology and DeFi have the potential to improve the efficiency of the payment system and encourage a more competitive financial sector.

This is an impressive recognition from the director of one of the leading financial institutions in the country. Other agencies and their staff have also embraced crypto and blockchain technology, although they all seem to be in favor of some level of regulation.

Crypto total market cap at $1.94 trillion on the daily chart | Source: TradingView.com

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Stablecoins are a type of cryptocurrency that is usually backed by a dollar or a commodity such as a precious metal.

CBDCs are digital displays of dollars or other fiat currencies issued by governments. The Fed is an exdigital currency, but has not yet decided whether to issue them. In January, she published a study on stable money.

Biden’s executive order

U.S. President Joe Biden signed an executive order earlier this month ordering the Treasury Department and other federal agencies to conduct a study on the impact of cryptocurrency on economic stability and national security.

Biden’s directive comes at a time when many Democratic lawmakers, especially Elizabeth Warren of Massachusetts, have expressed concern that cryptocurrency could be used to circumvent US sanctions on Russia.

As part of its executive mandate, the Treasury reports on the CBDC in consultation with the Ministries of Justice, Trade and State, as well as the Office of Management and Budget, Homeland Security and the Director of National Intelligence, to determine whether the U.S. should pursue the digital dollar.

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Featured image from CryptoSlate, chart from TradingView.com

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