Federal Reserve Chairman Jerome Powell, the highest official in the United States monetary system, has publicly acknowledged Bitcoin’s long-term viability, which comes as something of a surprise. The fact that one of the world’s most powerful financiers has taken notice of Bitcoin and other cryptocurrencies is yet another indication of their rising legitimacy in the conventional financial system. The Chairman’s endorsement is a watershed moment for Bitcoin and the way it could revolutionize the financial system in the future.
His testimony came during the House Financial Services Committee’s semiannual hearing on monetary policy, which was presided over by Patrick McHenry (R-NC).On Wednesday, Federal Reserve Chair Jerome Powell suggested that the U.S. central bank should have a “robust federal role” in regulating stablecoins. Stablecoins comprise a large portion of the entire crypto market, and lawmakers are attempting to draft rules for this market segment. Bitcoin and other cryptos, Powell added, have “staying power.”
In response to a question from Maxine Waters (D-CA), Powell argued that the federal government should exercise strict control over stablecoins, a type of crypto in which tokens are produced by private corporations and pegged to the value of a sovereign currency like the dollar.
Powell thinks of payment stablecoins as money
In many developed economies, the central bank serves as the ultimate source of credibility for money, according to Powell, who stated that payment stablecoins are viewed as a type of money. It is reasonable for the federal government to play a significant role in the future of stablecoins.
In response to the stablecoin bill’s current provision that would allow stablecoin issuers to register directly with states, Waters voiced worry that the Fed would be “constrained” from taking any action.
The Fed sees the bill as a crucial piece of the regulatory landscape for dollar-backed tokens, and Powell has noted as much, saying, “Let [a la FED] playing a weak role and allowing a lot of private money creation at the state level would be a mistake.”
Powell told Congress in 2021 that stablecoins, more than any other crypto asset, could constitute a significant element of the “payments universe.” He continued by saying that stablecoins ought to be governed in the same way as bank deposits and money market mutual funds are.
Since then, many pieces of legislation that would regulate stablecoins have stagnated in Congress. Once lawmakers have worked through the suggested adjustments in July, McHenry said the existing stablecoin measure would move forward to the Senate if a favorable agreement can be reached.
US and CBDCs
A US CBDC is conceivable, according to Powell, who made this claim when speaking with the House panel chaired by Patrick McHenry about the US Central Bank Digital Currency (CBDC). The Federal Reserve, he made clear, would neither oversee nor support any retail services connected to a digital dollar. We wouldn’t help personal accounts at the Federal Reserve, he added. As an alternative, the US banking system would be used to issue and manage US CBDCs.
Even though the US has led the globe in promoting the development of digital assets, since the conclusion of Q1 2023 and into Q2 2023, there have been adverse developments in the crypto business. For instance, the SEC has filed a lawsuit against Binance and Coinbase, two of the biggest crypto exchanges, alleging that they were operating illegally in the US. The SEC has also come under fire for allegedly failing to establish clear guidelines and standards for managing the sector.
According to Powell’s comments, Bitcoin, stablecoins, and crypto still seem to be of interest to the US.
The fact that the chairman of the Federal Reserve has acknowledged Bitcoin’s tenacity is another evidence of the growing acceptance and acknowledgment of cryptos as long-term assets. Bitcoin’s standing as a medium of exchange and investment opportunity grows as conventional financial institutions struggle to keep up with the times.
However, regulatory issues must be fixed to safeguard investors and keep markets functioning normally. As a result of the Chairman’s recognition, the crypto industry, central banks, and regulatory agencies may now openly debate how to work together for the benefit of all parties involved, ushering in a more inclusive and inventive financial future.
