Recently, Federal Reserve Chairman Jerome Powell once again demonstrated that he supports fair regulation of the crypto industry and mentioned that he doesn’t “see [cryptocurrencies] as a financial-stability concern at the moment,” meaning that he doesn’t believe that the industry is a systemic risk to the U.S. financial system and economy.
Powell also gave a green light to the government to draft and approve clear, safe, and sustainable regulations around the stable coin industry. “Stablecoins can certainly be a useful, efficient consumer serving part of the financial system if they’re properly regulated,” Powell said. “And right now, they aren’t.”
“And they have the potential to scale particularly if they were to be associated with one of the very large tech networks that exist,” Powell added.
Powell’s comments are a win for crypto
Powell’s statements are clearly a win for the crypto industry as it indicates that the Federal Reserve plans on finding ways in incorporating cryptocurrency into its financial sector. Since Powell doesn’t think that cryptocurrency poses a threat to the overall economy, it is likely that he will advise lawmakers to not suffocate the industry, but instead embrace it and find reasonable and sustainable ways to regulate the fast-growing sector.
Powell’s recent comments echo his recent confirmation that the U.S. has no plans to ban bitcoin and cryptocurrencies. Securities and Exchange Commission Chair Gary Gensler has said similar statements. All of this means that the U.S. government is slowly but surely showing that they are willing to embrace the industry and work with participants to ensure that customer’s digital assets are safe and secure.
Stablecoins to be regulated in 2022
The Biden administration has said that stablecoins, a type of digital asset pegged to traditional currencies, could revolutionize the way Americans pay for everything from electronics to cups of coffee. When fully regulated, stablecoins could “support faster, more efficient, and more inclusive payments options,” said the President’s Working Group on Financial Markets, which includes several top economic advisors to President Joe Biden. And he is right. Regulating stable coins is a good thing and will help the industry grow more sustainably over the long term.
I believe that next year, Biden’s economic advisors may introduce regulatory oversight and formal market structure to protect exchanges, issuers and investors. The White House may recommend that Congress pass legislation that would limit stablecoin issuance to insured banks, a rule that would give regulators significantly more jurisdiction over the industry.
From a regulatory standpoint, there is still much work to be done by the cryptocurrency industry and lawmakers to accurately represent and define where their interests align, and thereafter make an educated decision whether and to what extent to regulate the industry.
Regardless, the U.S regulation of cryptocurrency is still an embrace of the technology, which from a geopolitical perspective, couldn’t be more different than other nations that are banning it. Their loss is America’s gain.