Jerome Powell says that crypto does nothing to impede financial balance but still advocates for proper regulation of the sector.
The Chair of the US Federal Reserve Jerome Powell says that he does not consider crypto a financial stability concern. However, Powell also suggested that proper and efficient regulation of the crypto space is necessary. Speaking on crypto, the former investment banker said:
“You could have a payment network that was immediately systemically important that didn’t have appropriate regulation and protections. The public relies on the government and the Fed in particular to make sure that the payment system is safe and reliable.”
In fact, Powell explained that a well-regulated crypto industry could do a lot of good for mainstream finance. The Fed Chair pointed to the role of stablecoins and how they could improve the financial system. He also endorsed the Federal Government’s plans regarding the issuance of stablecoins by insured banks. In his own words regarding the crypto:
“Stablecoins can certainly be a useful, efficient consumer-serving part of the financial system if they’re properly regulated. Right now, they aren’t. They have the potential to scale, particularly if they were to be associated with one of the very large tech networks that exist.”
Also, back in September, Powell likened stablecoins to money market funds and bank deposits. However, the Fed Chair also acknowledged the peculiar nature of the commodity, fiat, and crypto-backed digital currencies. He described stablecoins as “outside the regulatory perimeter,” also calling for regulation.
Crypto According to Jerome Powell
Speaking at a press conference on Wednesday, Powell described digital currencies as “really speculative assets” at the moment. Still, the Fed Chair added that unlike China, he would not support the need to ban crypto. Powell’s stance seems to align with the Biden administration’s most recent view on digital currencies. In fact, the US president has picked the Fed Chair to continue in the position for another four years. Powell has been on the Fed’s board of governors since 2012, assuming the role of chair six years later. Going by the current executive development from the White House, his term as chair will expire in 2026.
Remarkably, Powell’s crypto view also diametrically opposes that of the Bank of England, which has taken a far more cautious approach. Back in October, Deputy Governor Jon Cunliffe suggested that the surging crypto market would crash global finance without proper regulation. Cunliffe also likened the potential threat to the 2008 financial global meltdown.
The crypto market now sits at $2.2 trillion in value. This comes after the Fed Reserve announced that they would leave interests unchanged while doubling down on bond purchase reduction. Powell fielded questions concerning some of the other associated risks and systemic issues to the US financial system. He chalked these up to four economic tenets: asset valuations, debt owed by organizations and households, funding risk, and financial institution leverage.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
