Fed Chairman Jerome Powell said today in a statement to the House of Representatives that stablecoins need stricter regulation similar to how bank deposits and short-term funds should be treated. A stablecoin currency is a type of cryptocurrency pegged to the price of a physical currency (usually US dollars).
Anthony Gonzalez (R-OH) specifically asked Powell about Tether, which is currently the most valuable and stablecoin, and has most thoroughly studied the business practices of the company behind it.
Tether once stated that its coins are backed by real dollars somewhere in a bank, but since then most of its support has come from paper transactions and debt. “Trading stocks are short-term corporate bonds, and most are worth investing in, but mostly good,” Powell said.
However, during the recent financial crisis, he added “conditions of equality.” Powell presented the House Financial Services Commission’s semi-annual Monetary Policy Report, which includes prepared statements and a series of responses to questions from the legislature.
Before explaining that government money is held in assets with a high degree of reliability, he explains that the regulatory framework for short-term deposits and money market funds does not really exist as a stable currency.
“If what we think of as stable currencies, not cryptocurrencies ,it is an important part of the payments world, we really need a proper regulatory framework that we don’t have,” Powell said. Tether and its subsidiary Bitfinex were fined $ 18.5 million.
Powell also spoke about CBDC in today’s hearing. In response to a question from Senator Stephen Lynch (D-MA), Chairman Powell suggested that developing a government digital dollar system would be a private cryptocurrency like Bitcoin and would eliminate the need for a currency.