Powell stated that the “ultimate source of credibility in money is the central bank” and that the Fed should play a “robust federal role” in deciding the future of all forms of money, including stablecoins.
Payment stablecoins are seen as a “form of money” and should be under the control of central banks, according to U.S. Federal Reserve Chair Jerome Powell, who made this statement during a hearing on June 21st. Powell was questioned by Congresswoman Maxine Waters about whether the Federal Reserve should license and regulate stablecoin issuers.
Waters alluded to stablecoins as a “new form of currency,” emphasized their rising popularity as a preferred payment mechanism, and wanted clarification on whether the Fed sees them as falling under its purview.
Related: EU watchdog warns about the risk of a bank run on stablecoins
Powell emphasized the need for uniform regulation across banks and non-bank companies engaged in payments and currency in his response. He said that comparable regulatory monitoring should apply to all of these businesses.
According to the Fed Chair, the central bank is the “ultimate source of credibility in money” and should have a substantial impact on the development of future stablecoins as well as other kinds of currency. Powell argued in favor of a strong federal role in determining the course of money, highlighting the significance of the central bank’s participation.
Powell did not go into depth about the Fed’s position on regulating stablecoins, but it is clear from his statement that the institution does not think highly of the companies who produce them. This means that in order to maintain financial stability and safeguard customers, the Fed believes that stablecoin activities require stricter regulation and supervision.
Regarding the potential hazards and ramifications of stablecoins, particularly those that seek to function as widely accepted payment instruments, regulators are becoming increasingly concerned, as evidenced by Powell’s words. Powell emphasizes the significance of central bank oversight while also emphasising the contribution of reputable financial institutions to the stability and legitimacy of the monetary system.
Related: Draft bill suggests separating legislation on payment stablecoins and digital asset markets