During a session at the U.S. House Financial Services Committee, Federal Reserve Chairman Jerome Powell spoke about the crypto market and its necessary regulatory frameworks, but admitted that a blanket ban on Bitcoin ($BTC) or any other digital assets, such as what China has implemented recently, was unrealizable.
Powell’s opinions on the question of banning crypto altogether were formed as a response to Republican Representative Ted Budd of North Carolina. Powell outlined how a ban in the same manner that the Chinese government implemented its crackdown on cryptocurrency as well as further restrictions on crypto mining.
Budd’s question stems from a previous statement from Powell in which the Federal Reserve chairman scrutinized the regulatory status of dollar-backed and algorithmic stablecoins, in relation to their role in the current development of the “digital dollar” led by the central bank. According to Powell, a U.S. dollar-based central bank digital currency (CBDC) may be able to function as cryptocurrencies and perhaps replace the need for stablecoins, without the requisite regulatory risk once opened to the general market.
“Stablecoins are like money market funds [and] like bank deposits but they’re, to some extent, outside the regulatory perimeter and it’s appropriate they be regulated. Same activity, same regulation.” Powell said.
Powell leads the Federal Open Market Committee, a federal agency responsible for implementing and developing monetary policy. The Committee has recently decided to continue its existing economic stimulus programs in response to the COVID-19 program, but acknowledged that this bond purchase program might soon halt. This recent warning from the Committee has placed a downward pressure on risk-relative assets, including stocks and cryptocurrencies.
Powell has recently revealed that a CBDC is already on the pipeline for release, pending further assessment and analysis from the Federal reserve.
“We're working proactively to evaluate whether to issue a CBDC and, if so, in what form...We think it’s really important that the central bank maintain a stable currency and payments system for the public’s benefit. That’s one of our jobs.” Powell stated.
Research on the matter is ongoing, with the Federal Reserve Bank of Boston working with the Massachusetts Institute of Technology (MIT) on a multi-year research collaboration. In recent news, two Federal Reserve bank leaders, Eric Rosengren (Boston) and Robert Kaplan (Dallas) have resigned over internal issues related to investment trading, with a pending review from the central bank in relation to ethics and rules.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.