BREAKING: Fed Chair Says Stablecoins Are A Form Of Money

Key Points:

• According to US Fed Chair Jerome Powell, payment stablecoins are a “form of money” that should be supervised by central banks.
• At a June 21 hearing, Powell asked if stablecoin issuers should be registered and controlled by the Fed.
• He expressed reservations about governmental clearance and preemption for stablecoin issuers.

In the House Financial Services Committee’s draft stablecoin rules, Fed Chair Jerome Powell advocated for the need for rigorous central-bank monitoring.

At a June 21 hearing, Powell was asked by Congressman Maxine Waters if stablecoin issuers should be registered and regulated by the Federal Reserve. The Fed Chair said that payment stablecoins are a “form of money” and that central banks should regulate them.

“We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank. We believe that it would be appropriate to have a quite robust federal role in what happens in stablecoins going forward, and leaving us with a weak role and allowing a lot of private money creation at the state level would be a mistake,” said Powell.

Powell also said that the Fed’s staff has been participating in discussions with legislators from both parties about the crypto legislation that committee members have been working on. He seemed suspicious about state permission and preemption for stablecoin issuers, which are presently part of a Republican-led plan due for committee consideration.

Maxine Waters also criticized her Republican colleagues’ idea to enable state authorities to authorize stablecoin issuance.

According to Waters, the plan takes state preemption to an unprecedented degree. She emphasized that a stablecoin approved in one jurisdiction may be sold in another, regardless of whether other state authorities have approved it.

While Republicans may get the measure through committee and the House of Representatives on a party-line vote, it needs Democratic backing to become law. Democrats control the Senate, and President Joe Biden would be reluctant to approve legislation that his own party opposes.

Powell did not go into specifics on the Fed’s stance on regulating stablecoins, but his final remark suggests that the central bank does not support private enterprises that issue stablecoins. In the next months, Lawmakers may seek new federal laws to put stablecoins under the supervision of the central bank.

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Harold

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