Fed chief Jerome Powell told the House of Representatives today that stablecoins will be subject to stricter regulations, similar to those of money market funds or bank deposits.

Powell was specifically asked by Representative Anthony Gonzalez (R-OH) about tether, currently the most valuable stablecoin. Tether claims that there is a dollar back on every coin, but that has been proven wrong. instead, it is mainly backed by commercial paper or debt. Most of the time, these assets are liquid, Powell said, but this was not the case during the recent financial crisis. He explained:

“The market has disappeared. And then people want their money. Quite simply: these are economic activities that are very similar to bank deposits and money market funds and must be regulated in a similar way. “

Powell went on to say that if stablecoins are to become part of the payments universe, regulation must be in place, as the regulatory framework “doesn’t really exist for stablecoins right now”.

He added that he doesn’t see volatile crypto assets as part of the future payments universe. The crypto asset was mentioned in the 75-page Monetary Policy Report released last Friday. You name it just one sentence mentioned in the context of “risky assets” and say:

“The price increase of many crypto assets partly also reflects the increased willingness to take risks.”

Congressman Stephen Lynch (D-MA) said a central bank digital currency, or CBDC, will reduce the number of cryptocurrencies introduced:

“You don’t need stablecoins, you don’t need crypto if you have US digital currency. I think that’s one of the strong arguments for it “,

Powell said an article on the benefits and risks of CBDCs in the US will be available in September.

He also responded to a question about the record inflation rates the US is experiencing, saying they have “increased significantly and are likely to continue to rise in the months ahead before the adjustment.”

Related: Bitcoin bounces off the $ 33,000 support as US dollar inflation comes back into focus

Powell maintained his earlier claims that the spike was temporary and that once certain markets, like used cars, return to their pre-pandemic condition, it will likely return to normal.

Powell will address the Senate Committee on Banking, Housing, and Urban Development tomorrow.