During a hearing before the U.S. House Committee on Financial Services, Federal Reserve Chairman Jerome Powell was questioned if the central bank is contemplating following China’s lead and outlawing all cryptocurrency transactions.
Powell responded by emphasizing that there is now “No plan to ban them,” yet he went on to explain why some stablecoins should be monitored.
The crypto market should be supervised in conformity with existing regulations, Powell said, who reacted to his prior comments that cryptocurrencies may be substituted by a central bank digital currency.
Powell informed Republican Representative Ted Budd of North Carolina that a ban on cryptocurrencies in the manner of China was not being explored.
Stablecoin regulation
Bitcoin, the most popular cryptocurrency, was 10.1 percent higher at $47,318.93 in New York trading on Friday night, up 13.2% in the previous seven days.
Budd’s inquiry was in reaction to Powell’s previous remarks on stablecoin regulation and the Fed’s current deliberations on issuing a CBDC.
CBDC might fulfill some of the same roles as cryptocurrencies, but without the regulatory dangers, according to Powell.
Outside regulatory framework
Stablecoins are similar to money market funds and bank deposits, Powell said, but they are outside the regulatory boundary to some extent, and it is essential that they be overseen.
Senator Cynthia Lummis, a pro-Bitcoin Democrat, had similar worries, arguing that stablecoins should only be distributed by “depository institutions or via money-market funds or similar vehicles.”
Stablecoins must be backed 100% by cash and currency equivalents, and this should be audited on a regular basis, Lummis said.
Both industry insiders and government officials have reacted angrily to China’s most recent crypto prohibition, as well as the increased regulatory surveillance on the domestic front, demanding transparency and clear direction from the US watchdog, the Securities and Exchange Commission.
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