US Federal Reserve Chairman Jerome Powell, speaking before the House of Representatives, called for the rules for dealing with bank deposits and mutual funds to be extended to stablecoins.
Powell said that digital currencies backed by fiat money have a lot in common with products already on the market. Therefore, there is no need to invent anything in this matter. It is enough for the state to use the regulatory and legal framework that operates in the traditional financial market.
Powell also did not rule out that in the future stablecoins could become part of the global market, unlike cryptocurrencies. But for this stable digital coins need a regulatory framework that does not yet exist in the United States.
His comments matched those of Federal Reserve Governor Lael Brainard. Who expressed concern in May that an increase in digital currency options could lead to “fragmentation” of the payment system, to the detriment of many households and businesses.
In June, billionaire Mark Cuban called for regulation of stablecoins. Cause he suffered losses due to the sharp depreciation of the Titan token from $ 60 to $ 0. According to Cuban, there should be a clear regulation of the issue of stable blocks and the rules for ensuring its liquidity.
Stablecoins cause concern for US authorities
Along with the growth of the cryptocurrency market and the development of the DEX, the need for stablecoins has increased. A stablecoin is a digital coin whose value tied to a specific physical asset. The first such digital currency, USDT from Tether, appeared in 2015. It is pegged to the value of the US dollar in a 1: 1 ratio.
There are now a huge number of stablecoins pegged to the US dollar. Many stablecoins unsecured or highly questionable.
This amount of unsecured stablecoins pegged to the US dollar is of great concern to the US authorities, since regulating fiat is the sole and sole prerogative of the state. The status of stablecoins not regulated by anything, as well as their legal status not determined, since they tied to fiat.
Digital dollar creation
The regulator is simultaneously considering options for creating a digital dollar (CBDC). According to Powell, such a tool could become an alternative to bitcoin. What’s more, Federal Reserve Chairman Jerome Powell believes the digital dollar will eliminate the need for other digital currencies.
Opposition of the financial elite
Some circles don’t like the idea of a digital dollar. A digital dollar would mean a reduction, and in some cases, the complete elimination of certain banking fees. Banks in the United States make about $ 17 trillion in deposits and billions in overdraft and account maintenance fees per year. CBDC will be a threat to their business.
Greg Baer, head of the Banking Policy Institute, warned that it would be harder and more expensive for businesses and individuals to access credit if the central bank were given such “exclusive powers.”
Another expert, Professor Eswar Prasad of Cornell University, who is set to release a book on digital currencies in September, suggested that in the event of a financial crisis like the 2008 crisis, digital currency could “actually make matters worse”.
Powell, meanwhile, also drew attention to concerns about rising inflation, maintaining his view that this is a temporary situation. Inflation will return to pre-pandemic levels as soon as some markets return to normal, the Fed chairman said.