The Chairman of the Federal Reserve, Jerome Powell, recently acknowledged the enduring presence of cryptocurrency as an asset class within the United States economy. Furthermore, he emphasized the central bank’s recognition of payment stablecoins as a form of currency and expressed the need for a strong federal role in regulating stablecoin activities moving forward.
Powell’s Perspective on Cryptocurrency’s Sustainability
During his appearance before the House Financial Services Committee, Federal Reserve Chairman Jerome Powell addressed several questions regarding cryptocurrency and stablecoins. Congressman Warren Davidson (R-OH) highlighted the current market capitalization of the crypto industry, amounting to approximately $1.1 trillion, and inquired about its longevity in the U.S. economy. In response, Powell stated:
“It appears to have some staying power.”
Powell also pointed out that the market capitalization of the crypto industry was significantly higher one year ago, indicating its fluctuating nature.
Rep. Davidson promptly attributed the crypto market’s volatility to the lack of regulatory clarity and emphasized the committee’s intention to rectify this situation by introducing relevant bills, including those concerning stablecoins.
The congressman further highlighted the U.S. Securities and Exchange Commission’s (SEC) active involvement in the cryptocurrency space. He emphasized the need for forthcoming legislation to provide clarity not only to SEC Chair Gary Gensler but also to Congress and industry participants. Last week, Rep. Davidson and House Majority Whip Tom Emmer (R-MN) introduced the SEC Stabilization Act, aiming to “restructure the Securities and Exchange Commission and replace Gary Gensler as its Chair.”
Powell Identifies Payment Stablecoins as a Form of Currency
During his testimony, Rep. Maxine Waters (D-CA) questioned Powell about stablecoins. She informed the committee about a proposed stablecoin bill, co-sponsored by herself and Republican colleagues, which would establish 58 different licenses. Out of these, only two licenses would require federal regulatory approval, while the remaining 56 licenses could be issued by individual states, territories, and D.C. with minimal federal oversight or regulation. In response, Powell asserted:
“We do see payment stablecoins as a form of money… We believe that it would be appropriate to have quite a robust federal role in what happens in stablecoins going forward.”
Powell emphasized the potential risks associated with a weak federal role, which would allow extensive private money creation at the state level. He also noted that in advanced economies, the central bank serves as the ultimate source of credibility for currency.
What are your thoughts on Federal Reserve Chairman Jerome Powell’s recognition of cryptocurrency’s endurance in the U.S. economy and the acknowledgment of payment stablecoins as a form of money by the Fed? Feel free to share your opinions in the comments section below.
Frequently Asked Questions (FAQs) about cryptocurrency endurance
Q: What did Federal Reserve Chairman Jerome Powell acknowledge regarding cryptocurrency in the US economy?
A: Federal Reserve Chairman Jerome Powell acknowledged the staying power of cryptocurrency as an asset class in the US economy, recognizing its enduring presence and significance.
Q: How does the Federal Reserve view payment stablecoins?
A: The Federal Reserve considers payment stablecoins to be a form of money. They believe that a robust federal role is necessary in regulating stablecoins going forward to ensure proper oversight and avoid potential risks.
Q: Why does Congressman Warren Davidson attribute the volatility of the crypto market to the lack of legal clarity?
A: Congressman Warren Davidson believes that the lack of legal clarity surrounding cryptocurrencies has contributed to the market’s volatility. He emphasizes the importance of introducing bills to establish regulatory clarity and provide guidance for market participants and the SEC.
Q: What is the proposed stablecoin bill mentioned by Rep. Maxine Waters?
A: Rep. Maxine Waters and her Republican colleagues have proposed a stablecoin bill that aims to create 58 different licenses. Out of these licenses, only two would require federal regulatory approval, while the remaining 56 could be issued by individual states, territories, and D.C. with limited federal oversight or regulation.
Q: Why does Chairman Powell emphasize the need for a strong federal role in stablecoin regulation?
A: Chairman Powell stresses the importance of a robust federal role in stablecoin regulation to prevent a weak regulatory environment that could lead to excessive private money creation at the state level. He believes that the central bank’s involvement ensures credibility and stability in the currency system.
More about cryptocurrency endurance
- Federal Reserve Chairman Jerome Powell Testimony
- U.S. House Financial Services Committee
- SEC Stabilization Act