Fed Chair Says Crypto Is A Mess But They Won’t Stop Crypto Innovation

Key Points:

• Federal Reserve Chairman Powell said at a US Senate Banking Committee hearing that they do not want to stifle the development of cryptocurrencies.
• However, he thinks this is a mess, so Congress needs to develop a legal framework for digital senders in the United States.
• The Fed Chairman said that stablecoins also need to be carefully monitored.
• Earlier, the Chairman of the US Federal Reserve made the latest comment on the inflation situation in the world’s largest economy, which is still much higher than expected so that interest rates can be raised to a higher level higher.

The Fed Chairman stated that he still warned banks to be careful when doing business with companies in the crypto industry. He assessed that this is a chaotic industry, so a specific legal framework is needed to manage it.

Participating in a regular hearing before the US Senate Banking Committee on March 7, US Federal Reserve Chairman Jerome Powell answered a series of questions from lawmakers about a 2022 crisis in the cryptocurrency industry.

The general view of Mr. Powell is that while he does not want to “suffocate” the advancements that can be gained from the crypto space, in its current state, it is a place of risk and lack of regulation.

“We have to be open to the idea that – somewhere in there – there is the technology that can be featured in product innovation that makes people’s lives better,”

Powell told committee members in his twice-yearly trip to testify on Capitol Hill.

The Fed and US regulators in early 2023 issued a warning to banks that are providing services to crypto companies, pointing out many risks to watch out for.

However, Silvergate Bank recently announced a delay in filing periodic reports with the SEC, leading to many speculations that it is the next name to be affected by the FTX chain collapse of the crypto market. Silvergate’s partner crypto companies quickly cut ties with the bank.

Even so, Mr. Powell acknowledged that there could still be helpful innovations from the crypto industry.

“We don’t want to stifle innovation,”

He said.

Powell has been asked to address crypto issues several times during his testimony, which will continue Wednesday before the House Financial Services Committee. He believes there needs to be a specific legal framework to control the situation of this market in the United States.

Another topic of great interest is the “big question mark” about the future of stablecoins, cryptocurrencies pegged to the US dollar (USD). The Fed Chairman said that stablecoins also need to be carefully monitored.

Mr. Powell said stablecoins could become part of the financial industry if fully regulated but expressed concern about the risks of public blockchains, such as vulnerability to fraud, money laundering, and illegal activities. However, in the past, the Fed has stated that it is open to issuing a CBDC, or central bank-managed cryptocurrency.

Also, on the evening of March 7, the Chairman of the US Federal Reserve made the latest assessment of the inflation situation in the world’s largest economy, which is still much higher than the target of bringing inflation to 2% of this agency, so it can continue to raise interest rates to higher than previous projections. Bitcoin, the cryptocurrency market, and the US stock market have seen their volatility plummet because of Mr. Powell’s comments.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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