Jerome Powell however says cryptocurrencies are speculative and “not backed by anything” and could be an issue for consumers
However, he does mention that stablecoins could be useful if there is proper regulation.
Fed chair Jerome Powell said on Wednesday that although cryptocurrencies may be a risk for investors, he doesn’t see them as a concern for the financial stability of the US economy.
He stated this at a press conference after the Fed’s two-day meeting, which saw the FOMC reiterate a faster tapering and announced a potential three interest hikes in 2022. Powell said he doesn’t think cryptocurrencies are a risk likely to disrupt the financial system, pointing out that the assets are really speculative and “not backed by anything.”
“I don’t see them [crypto]”A financial stability concern at this time,” the Fed chair stated.
He did however mention that crypto could pose a problem for consumers who might not be aware of the potential risks.
What about stablecoins.
Powell’s comments come at a time many within the crypto industry have called for proper regulation, noting that authorities need to ensure they embrace innovation and not strive to kill it.
Stablecoin is a new type of crypto asset that is tied to another asset like the US dollar.
Last month, the US President’s Working Group on Crypto Regulation published a report urging US lawmakers to approve new laws that would allow banks to insure stablecoins. Last week, several crypto chiefs travelled to Capitol Hill to discuss the issue of crypto legislation.
Wednesday’s comments by the Fed chair indicated that stablecoins could be used to serve consumers and are a useful part of the monetary systems. But, it’s important to make sure they (stablecoins), are properly regulated. Unfortunately, this is not the case right now.
But the lack of proper regulation doesn’t mean stablecoins cannot play an essential role in the economy, he explained. Powell believes that the sector could be important if it was linked to one the Big Tech companies.
In this case, he noted, the stablecoin in question could scale to become an “efficient consumer-serving [and systemically important] part of the financial system.”
Powell also noted that it was important for payment networks to comply with all regulations and offer consumers the protections they need. These aspects are crucial because the public trusts authorities to ensure consumer safety.