Powell said on Wednesday he doesn’t see cryptocurrencies as a threat to the financial stability of the US economy, despite the fact that they may pose a risk to investors. Powell says crypto s not a financial concern.
- Powell says crypto, cryptocurrency is speculative, not backed by anything, and could be a problem for consumers.
- However, proper regulation could make stablecoins a useful part of the financial system.
At a press conference following the Fed’s two-day meeting, the FOMC reiterated a faster tapering strategy and predicted three interest rate hikes in 2022.
Powell says crypto don’t pose a risk to the financial system because they are speculative and “not backed by anything.”.
“I am not concerned about crypto at the moment,” noted the Fed chair.
He did, however, mention that cryptocurrency could cause issues for consumers who might not know the risks involved.
Stablecoins: How do they work?
Powell’s comments come at a time when many in the crypto industry are calling for regulation, noting that authorities need to embrace innovation rather than defeat it.
A stablecoin, for example, is a crypto asset whose value is pegged to another asset, such as the US dollar.
U.S. President’s Working Group on Crypto Regulation released a report last month calling on US lawmakers to pass new legislation requiring banks to insure stablecoins. There were also several crypto chiefs on Capitol Hill last week to meet with lawmakers about crypto legislation.
According to the Fed chair, stablecoins could be useful to consumers as an aspect of the monetary system. Yet, he said, there is a need to ensure the coins (stablecoins) are properly regulated, which is not the case at the moment.
The lack of proper regulation does not mean stablecoins cannot play an important role in the economy, he explained. Powell believes the sector could become important if it were linked to one of the big tech companies of today.
According to him, the stablecoin in question could scale to become an “efficient consumer-serving [and systemically important] part of the financial system.”
Powell also noted that it is essential to have a payment network that follows the appropriate regulations and offers consumers the necessary protections. Consequently, these aspects are crucial because authorities are relied upon when it comes to ensuring consumer safety.
