Fed Chair Powell Says Crypto Requires New Rules, Citing ‘Threats’ To US Financial System

Christian Encila

1 year ago

2 mins read

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Federal Reserve Chairman Jerome Powell emphasized on Wednesday that technology transformation is here to stay in the financial sector and that new regulations will be required.

Powell revealed some insight into how the United States would govern the market during a presentation at the Bank of International Settlements Innovation Summit on central bank digital currencies.

The digital age was not taken into consideration when establishing our current regulatory structures, the Fed official said.

“There will be revisions to current laws and regulations, as well as the creation of wholly new rules and structure, if central banks, stablecoins, and digital currencies are to be implemented,” he said during a roundtable discussion on CBDCs at the BISI Summit.

Is There A Threat?

Powell noted that emerging forms of digital money, like cryptocurrencies and stablecoins, pose threats to the US financial system and will necessitate the adoption of additional consumer protection measures.

Powell reaffirmed his position that cryptocurrency should adhere to the “same activity, same regulation” premise.

He proposed regulating stablecoin issuers, such as banks, in October 2021.

“Stablecoins function similarly to money market funds. They’re similar to bank deposits… and it is reasonable for them to be controlled similarly, same activity, same regulation,” he concluded.

Powell Says DeFi Can Improve Finance Sector

Despite this, the Fed chairman acknowledged that distributed technology and DeFi have the potential to improve the payment system’s efficiency and foster a more competitive financial sector.

This is an impressive recognition from the director of one of the country’s premier financial institutions. Other agencies and their personnel have embraced crypto and blockchain technology as well, albeit they all appear to advocate for some level of regulation.

Crypto total market cap at $1.94 trillion on the daily chart | Source: TradingView.com

Stablecoins are a type of cryptocurrency that are typically backed by the dollar or a commodity such as precious metal.

CBDCs are digital representations of dollars or other fiat currencies that governments issue. The Fed is exdigital currencies but has not yet decided whether to issue them. In January, it published a study on stablecoins.

Biden’s Executive Order

US President Joe Biden signed an executive order earlier this month directing the Treasury Department and other federal agencies to conduct a study on the impact of cryptocurrency on economic stability and national security.

Biden’s directive comes as many Democratic legislators, notably Massachusetts’ Elizabeth Warren, have expressed worry that cryptocurrency could be used to circumvent US sanctions against Russia.

As part of the executive mandate, the Treasury is leading a report on a CBDC in consultation with the Departments of Justice, Commerce, and State, as well as the Office of Management and Budget, Homeland Security, and the Director of National Intelligence, to determine whether the US should pursue a digital dollar.

Featured image from CryptoSlate, chart from TradingView.com

Christian Encila

They say journalists never truly clock out. But for Christian, that's not just a metaphor, it's a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.

Christian's journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).

Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling - right up his alley!

So, he landed a killer gig at NewsBTC, where he's one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).

Think Christian's all work and no play? Not a chance! When he's not at his computer, you'll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.

Speaking of chill, Christian's got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.

Here's the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day - and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.

Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors - and bosses - he deeply respects.

So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.

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