Federal Reserve Chairman Powell: Congress needs to develop a legal framework to regulate stable currency

It is reported that the Federal Reserve Chairman Powell said in his testimony at the hearing of the Senate Banking Committee that the Federal Reserve and other U.S. banking regulators have repeatedly issued statements and policy interpretations to issue severe warnings to banks about cryptocurrencies. In the recent warning, regulators clearly pointed out that banks that focus on encryption may not meet the security and soundness standards, which are the benchmark for continuing to operate in the United States. In addition, Powell said that Congress needs to intervene to provide a “feasible legal framework” for the digital assets of the United States, and listed the stable currency as an area that needs to be regulated. (CoinDesk)

Interpretation of this information:

Federal Reserve Chairman Powell emphasized in his hearing at the Senate Banking Committee that U.S. banking regulators have been issuing several policy interpretations and warnings to banks regarding cryptocurrencies. The regulators have explicitly mentioned that banks that solely focus on encryption may not adhere to security and soundness standards, which is imperative for continued operation within the U.S. Powell stated that a feasible legal framework for digital assets in the U.S. is necessary, and stable currency is one of the areas that requires regulation.

As cryptocurrencies continue to become popular, it is essential for regulators to ensure that the safety of the traditional financial system is not compromised. The Federal Reserve and other U.S. banking regulators have been tirelessly reminding banks of the risks associated with cryptocurrencies. The regulators have highlighted that solely focusing on encryption is not enough for banks to meet the security and soundness standards, which are essential for continued operation in the U.S. Banking regulators have been keen to keep the safety of the traditional financial system a priority while allowing new technologies to develop.

Powell mentioned that there is a need for Congress to intervene and provide a feasible legal framework for digital assets. Digital assets, such as cryptocurrencies and stablecoins, are becoming increasingly popular and have started to gain mainstream acceptance. It is imperative that Congress develops a legal framework that addresses the evolving landscape of digital assets to retain public trust in financial institutions.

The Federal Reserve Chairman also mentioned that stablecoins are an area that needs to be regulated due to its potential to become a systemic risk. Stablecoins are digital currencies whose value is pegged to that of a traditional currency like the U.S. dollar or the euro. Due to its pegging, the stability of the value may create a false sense of assurance, leading to the creation of bubbles that can cause systemic risk. Regulations aimed at stablecoins are crucial to ensure that there is a balance between innovation and financial stability.