- Stablecoins recognized as a form of currency
- Strong federal regulation needed for oversight
- Central Bank Digital Currency (CBDC) still a distant possibility
Jerome Powell, the Chairman of the Federal Reserve (FED), acknowledged that stablecoins are a form of currency and emphasized the need for strict regulation and oversight by banks. Speaking at a biannual session on monetary policy, Powell expressed his concerns about the upcoming legislation to be voted on in July, highlighting the importance of a strong federal authority in regulating the sector to avoid negative consequences for the economy.
Regulation of Stablecoins: Insights from Fed Chairman
Stablecoins as a Form of Currency
In his speech, Powell stated that stablecoins are considered a type of currency, and in all advanced economies, the ultimate source of reliability for money is the central bank. He emphasized the necessity of having a strong federal role in determining the future of stablecoins, as leaving the sector unregulated and allowing the creation of numerous private currencies at the state level would be a mistake.
Democratic Skepticism towards July Legislation
While the Republican side in the US Congress is increasingly supportive of cryptocurrencies, the Democratic camp continues to maintain a critical stance. Representative Maxine Waters, the top Democrat on the House Financial Services Committee, expressed skepticism about the legislation to be introduced in July, warning about the potential consequences of haphazard regulations and the chaos surrounding stablecoins across states.
Approval of legislation with a positive approach towards cryptocurrencies and stablecoins will require the support of Democrats. However, Waters’ opposing views indicate that progress may not be as smooth as expected, considering that Democrats hold the majority in the US Senate compared to Republicans.
Expected Vote on Legislation in July
The legislation that will provide more clarity on cryptocurrencies and stablecoins is expected to be voted on by the House of Representatives in the second week of July.
