The chairman of the Federal Reserve, Jerome Powell, said stablecoins, and their lack of regulation, are a key concern for the Fed. “Cryptocurrencies have tried and have failed to become a viable payment method, apart from their use by privacy fanatics“, he told the Senate Banking Committee.
“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they’ve completely failed to become one, except for people who want anonymity, of course, for whatever reason,” he told Sen. Cynthia Lummis of Wyoming.
Building on testimony he gave Wednesday to the House Financial Services Committee, Powell reiterated that stablecoins, and their lack of regulation, are a key concern for the Fed.
If we’re going to have something that looks like a money market fund, a bank deposit or a narrow bank, and it’s growing very fast, we really should have proper regulation. And today we don’t have it (Powell)
“Really the question is stablecoins,” he said, comparing dollar-linked cryptocurrencies to money market funds or bank deposits. “They are growing incredibly fast, but without proper regulation.“.
“If we’re going to have something that looks like a money market fund, a bank deposit or a narrow bank, and it’s growing very fast, we really should have proper regulation. And today we don’t have it,” Powell added.
On Wednesday, Powell told the House committee that an official U.S. digital currency could obviate the need for cryptocurrencies or stablecoins.
With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they’ve completely failed to become one, except for people who want anonymity, of course, for whatever reason.
Concerns about stablecoins abound, including fears that they could be used to manipulate markets and have dubious ties to the dollar. Last year, several representatives of the House proposed legislation that would place stablecoins under the scope of traditional banking regulation.
Inflation in the U.S.
Powell acknowledged to senators that inflation is currently well above 2%, adding, “Of course we’re not comfortable with that” noting that unemployment also remains high at 5.9 percent.
He then argued that the Fed “doesn’t want to raise interest rates to counter what it sees as temporarily higher prices.”
The head of the US Federal Reserve admitted in Washington that he is not “comfortable with this rate of inflation,” which he described as “historic.” The Fed chief appeared before the Senate Committee on Banking, Housing and Urban Affairs and noted that “this particular inflation is unique in history.”
“We have no other example of the last time we reopened a $20 trillion economy. We are humble about what we understand,” the Fed chief said.
This is the second time in the week that Powell has appeared on Capitol Hill, following his presentation, to the House of Representatives.
The Fed said it will keep its benchmark short-term interest rate close to zero until it believes it has reached peak employment and inflation.Annual ion moderately exceeds 2% for some time.
In the Beige Book, the agency’s policymakers have said they are prepared to accept inflation above their target to offset years of inflation below 2 percent.
The Fed is also buying $120 billion a month in bonds and other mortgage-backed assets, which are meant to keep long-term interest rates low to encourage borrowing and spending.
The agency began discussing its timeline for reducing those bond purchases, Powell said, and will continue to do so at its next meeting on July 27-28. Some economists believe the Fed will announce a reduction in those purchases in September, though others argue that an announcement in November or December is more likely.