The Chairperson of Fed, Jerome Powell has recently shared his word on stablecoins and CBDCs and said that they should be subject to stricter regulations. During his semi-annual monetary policy report to Congress, he asked that the CBDCs and stablecoins should be treated like bank deposits and money market funds. Jerome Powell of Fed Says Stablecoins and CBDCs Require Serious Regulations Talking about the working of stablecoins, it is a kind of cryptocurrency that is pegged to the price of a fiat currency, basically, here we are talking about the US dollar. The peg keeps the price of the coin stable and provides the traders with the flexibility and translucency of cryptocurrencies without fluctuations. When Powell was asked about the most valued stablecoin at present, Tether USDT, by Rep. Anthony Gonzalez, it was revealed that though initially it was said that each of the Tether coins was backed by a real dollar, the majority of the coins are backed from debts or commercial papers. Powell said: “Commercial paper is short-term overnight obligations from companies, and most of the time they’re investment grade, most of the time they’re very liquid, it’s all good.” Addressing the need to regulate these coins, Powell added by saying that during the recent financial crisis: “The market just disappears. And that’s when people will want their money. It’s very simple: these are economic activities very similar to bank deposits and money market funds, and they need to be regulated in comparable ways.” Powell Comments on the Potential Development of a CBDC Well, talking about the capable future of cryptocurrencies and whether they are going to be a part of the future payments universe, Powell said: “If they are going to be a significant part of the payments universe, which we don’t think crypto assets will be, but stablecoins might be, then we need an appropriate regulatory framework, which frankly we don’t have.” In response to the question of the development of a CBDCs, Powell suggested that the development of a digital dollar system may preclude the requirement for private crypto assets such as Bitcoin.
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