Like other federal agencies, the FED wants to regulate stablecoins.
US Federal Reserve Chairman Jerome Powell has expressed interest in regulating stablecoins.
During his testimony at the latest biannual hearing before the House Financial Services Committee, Powell acknowledged payment stablecoins, those backed by fiat currency, as a form of money and stressed that the federal agency should play a key role in regulating them.
The FED chairman admits that stablecoins can have a huge impact on the financial system, by allowing the realization of payments more efficiently and inclusivelyHowever, Powell's position on stablecoins is contrary to those taken by the current SEC chair Gary Gensler and CFTC chair Rostin Behnam, who so far believe that these digital assets should require registration and be regulated as commodities, respectively.
Powell's comments came in response to a question from Rep. Maxine Waters, who questioned the Fed's role in regulating stablecoins. Waters commented that these digital assets They have been gaining popularity among Americans as a new type of “currency” for making payments., to which Powell responded that the responsibility for regulating any form of money, even if it is digital currencies such as stablecoins, falls on the central bank; that is, the FED.
Powell also expressed concern about the risks posed to US financial stability and leadership by the issuance of private money without oversight. As for Bitcoin, the FED chairman said that it has a «lasting power».
The FED as the main regulator of stablecoins
Currently, US lawmakers are considering several law proposals which have been presented to Congress to regulate stablecoins in the country.
Congressman Patrick McHenry, who introduced one of the bills in question, emphasized the need for the US government to create a regulatory framework that provides requirements for stablecoin issuers, in order to require reserves that guarantee the stability of these digital currencies as well as the protection of investors and users against possible events such as the collapse of UST, in May 2022 and the FTX debacle, last November.
US lawmakers are also considering creating a regulatory framework for stablecoins to ensure the strength of the US dollar in the international market.
The draft law presented by McHenry proposes the FED as the main authority for stablecoin oversight in the country.
Crypto companies fleeing the US
The regulatory approach the United States is taking to oversee stablecoins and the broader crypto market differs from that of other jurisdictions, such as Hong Kong, which is seeking to build a favorable legal environment that will allow the crypto industry to develop into a major global hub for cryptocurrency and technological innovation.
So far, U.S. lawmakers and federal agencies have been unable to unify and harmonize their approaches to move forward in creating a clear regulatory framework for the growing cryptocurrency and digital asset market.
According to Moody's, a US-based credit rating agency, the political divide that exists in regulating cryptocurrencies in the country makes the United States less attractive, which could end up driving companies, investors and talent from the crypto industry in general out of the country to seek other jurisdictions with more friendly policies towards this industry.
The United States “could prove comparatively less attractive for both companies and investors, especially in a context where many other jurisdictions are moving forward with comprehensive regulations,” the rating agency said in a report published this week. In line with the above, Coinbase has already begun looking at other jurisdictions with clearer legislation and potential for growth.
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