Stablecoins need more regulation: Fed chairman

Stablecoins need more regulation, as Fed Chairman Jerome Powell said in his address to Congress on CBDCs and stablecoins, so check out our latest crypto news for more.

Fed chairman Jerome Powell told Congress that stablecoins need to be more strictly regulated in ways that are unlike bank deposits and money market funds. Powell said stablecoins should also be treated as bank deposits. A stablecoin is a cryptocurrency that is pegged to the price of a physical currency such as the US dollar. The idea is to keep the price of the coin stable and give traders some of the flexibility and transparency of the cryptocurrency without the volatility.

Representative Anthony Gonzales asked Powell about Tether, the most valuable stablecoin and one of the most scrutinized in the supporting company’s dealings. While Tether once claimed that every coin was backed by real dollars held in a bank somewhere, it turned out that much of the backing came from commercial paper or bonds. Powell said:

“Commercial papers are short-term overnight liabilities from companies and are mostly forms of investment, mostly very liquid, which is good. But the markets disappeared during the recent financial crises. And then people want their money. Quite simply, these are economic activities that are very similar to bank deposits and money market funds and need to be regulated in a similar way. “

Powell appeared before the House of Representatives Financial Services Committee to present his report on monetary policy, both in terms of a prepared statement and responses to legislative questions. He says:

“We have a tradition in this country where public money is held in supposedly very secure assets. ]If they become an important part of the payments universe that we don’t believe will be crypto assets, but possibly stablecoins, then we need a proper regulatory framework, honestly we don’t have one. “

The battle between Tether and NYAG recently ended with a settlement that fined Tether and Bitfinex $ 18.5 million. During his most recent hearing, Powell commented on the possible development of a CBDC, or central bank digital currency, that the Fed despises. Powell also suggested that the development of a state-controlled digital dollar system could eliminate the need for private cryptocurrencies.

.