Fed sees stablecoin as a form of money and desires a 'robust' role in its oversight: Jerome Powell
Federal Reserve Chair Powell asserts stablecoin's monetary status, demanding robust oversight to address its regulatory implications
Jerome Powell, Chair of the United States Federal Reserve Board; Image: Kevin Lamarque/ Reuters
During a recent House of Representatives Financial Services Committee hearing, Jerome Powell, Chair of the United States Federal Reserve Board, shared the board's perspective on stablecoins, considering them a form of money.
This statement was made in response to inquiries about a proposed stablecoin bill, which is the first crypto legislation in the country and was introduced by the Republicans.
Ranking committee member Maxine Waters expressed concerns about the bill, particularly regarding creating 58 licences, with only two requiring federal regulatory approval. Waters viewed this arrangement as an expansion of state preemption.
In reply, Powell affirmed the Federal Reserve's position, stating, "We do see payment stablecoins as a form of money, [...] and we believe that it would be appropriate to have quite a robust federal role in what happens in stablecoin going forward." He emphasised the potential risks of allowing extensive private money creation at the state level.
Powell's perspective diverges from that of Gary Gensler, Chair of the Securities and Exchange Commission (SEC), who has previously indicated that stablecoins might necessitate registration and regulation. Gensler has consistently asserted that all cryptocurrencies, except Bitcoin (BTC), should be classified as securities.
Chris Giancarlo, former Chair of the Commodity Futures Trading Commission (CFTC), also weighed in on the bill, expressing concerns about possible government overreach.
Giancarlo highlighted the potential for licensing authorities to manipulate stablecoin protocols, thereby denying services to lawful but politically disfavored businesses. He cautioned that such a scenario could resemble the controversial policy known as Operation Choke Point, which was implemented during the Obama administration.
Giancarlo proposed a solution that would restrict government licensing authorities from selectively choosing among lawful activities and conditioning licensing on the denial of legal transactions by stablecoins. Giancarlo argued that stablecoin transactions would only be subject to the unpredictable political landscape in Washington with these measures.
These recent developments underscore the ongoing discussions and varying viewpoints among regulatory authorities concerning stablecoins. As different regulatory bodies articulate their positions and concerns, policymakers must work towards finding a balanced approach that ensures financial stability, consumer protection, and innovation within the evolving landscape of digital currencies.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
