Powell testified before the House Financial Services Committee on Thursday on matters related to the economy and the Covid-19 pandemic.
Federal Reserve Chairman Jerome Powell believes the federal government needs to regulate the cryptocurrency market, but that a blanket ban on Bitcoin (BTC) and other digital assets is not in the cards.
Speaking in response to a question from Republican Representative Ted Budd of North Carolina, Powell clarified that a China-style ban on digital assets was not something he’s considering. Rep. Budd’s question came in response to Powell raising doubts about the regulatory status of stablecoins and the central bank’s ongoing deliberations around a so-called “digital dollar.” (In Powell’s view, a central bank digital currency, or CBDC, could perform many of the functions of stablecoins and cryptocurrencies but without the regulatory risk.)
“Stablecoins are like money market funds [and] like bank deposits but they’re, to some extent, outside the regulatory perimeter and it’s appropriate they be regulated,” he said. “Same activity, same regulation.”
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A central bank digital currency has been on the Fed’s radar for some time, but policymakers remain undecided on whether to pursue the project. In the meantime, the central bank has commissioned several research reports on the advantages and potential roadblocks of issuing a CBDC.
Powell oversees the central bank’s Federal Open Market Committee, which is responsible for setting United States monetary policy. Earlier this month, the Committee decided to leave its existing stimulus programs intact but said that the pandemic-induced bond purchase program could be winding down soon. The warning appears to have put some downward pressure on risk assets, which includes stocks and cryptocurrencies.