Fed Chair Jerome Powell Argues private stablecoins can co-exist with US CBDC
14 January 2022 - 01:46AM
NEWSBTC
On Jan. 11, Federal Reserve Chair Jerome Powell told Senate
legislators that nothing prevents privately issued stablecoins from
coexisting with a prospective Fed central bank digital currency
(CBDC). Jerome Powell Confirms Fed-issued Digital Currency Is
Underway Sen. Pat Toomey (R-Pa.) asked Powell during his
confirmation hearing for a second term as Fed chairman whether
there was place for a future Fed-issued digital currency to coexist
with a privately issued stablecoin. Toomey asked: “Is there
anything about that that should preclude a well-regulated,
privately issued stablecoin from coexisting with a central bank
digital dollar if Congress authorizes and the Fed pursues a central
bank digital dollar?” Powell said the Fed would publish a study on
digital currencies soon at a Senate Banking Committee meeting
earlier this week. Senator Pat Toomey, the top Republican on the
panel, questioned Jerome Powell during the session. Powell
responded, “No, not at all,” when asked if a CBDC would exclude the
formation of a “well regulated, privately issued stablecoin.” While
other countries continue to create their own CBDCs, the US monetary
authority has yet to make an official announcement about plans to
introduce a digital dollar. Despite Powell’s remark, it’s unclear
how private tokens would compete if the Fed issued a digital
currency. USDT, the largest stablecoins by market cap, stands at
$78 billion. Source: TradingView Stablecoins have proven to be an
important component of the cryptocurrency integration process,
since investors frequently utilize their steady rate as a starting
point for trading other digital currencies. However, the Federal
Reserve and other US watchdogs have previously warned that
stablecoins require more stringent regulation and should only be
issued by licensed entities such as banks. Financial agencies
should have the same jurisdiction to regulate stablecoin issuers as
banks, according to the President’s Working Group on Financial
Markets. While the Fed has remained tight-lipped about whether it
plans to introduce its own digital currency, similar to China’s
yuan, the central bank and other US financial regulators have
previously stated that stablecoins require additional supervision
and should be issued by banks. Related article | CBDCs to coexist
with cash payments, according to FED Chairman Powell U.S.
President’s Working Group on Financial Markets To Regulate
Stablecoins Stablecoins could be used widely in the future as a
means of payment by individuals and businesses, according to a new
report from the President’s Working Group on Financial Markets
(PWG), but sufficient regulation is required to manage risks. The
Treasury Department said in a statement: “The potential for the
increased use of stablecoins as a means of payments raises a range
of concerns, related to the potential for destabilizing runs,
disruptions in the payment system, and concentration of economic
power,” The PWG suggested that Congress establish laws to protect
against dangers, such as treating stablecoin issuers as depository
institutions covered by the Federal Deposit Insurance Corporation
(FDIC) and subjecting custodial wallet providers to adequate
federal regulation. Powell was present, as was Treasury Secretary
Janet Yellen and SEC Chair Gary Gensler, the latter of whom
expressed reservations. Related article | FED’s Powell Doesn’t
Think Crypto Risks Financial Stability Featured Image by
Gettyimages | Charts by TradingView
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