Jerome Powell, chairman of the Federal Reserve, spoke in favor of strict central-bank supervision of stablecoin in the policies being developed by members of the House Financial Services Committee. Powell shared his thoughts while speaking at the House Financial Services Committee’s semi-annual hearing on Fed policy on June 21.
The proposed stablecoin bill originated from Republicans and would serve as the official piece of crypto regulation in the United States if approved next month. Rep. Maxine Waters, the committee’s top Democrat, in her questioning of Powell, warned that the Fed would be “severely hamstrung” by the new proposal and that there has to be a clear federal floor for regulation of nonbank stablecoin issuers.
The Republican-sponsored bill seeks to ensure that states have a significant role in supervising stablecoins. This has been an issue of contention since negotiations began last year.
Waters warned that the bill would create “58 different licenses with federal regulatory approval over only two of the licenses.” The Democrat added that states, territories, and other jurisdictions will issue the remaining licenses.
Responding to Waters, Powell claimed that the FED sees “payment stablecoins as a form of money and argued that “in all advanced economies, the ultimate source of credibility in money is the central bank.” Powell called for the FED to play a huge role in regulating stablecoins. He added that “it would be appropriate to have quite a robust federal role.”
The 70-year-old Powell further claimed that “allowing a lot of private money creation at the state level would be a mistake.” Interestingly, Powell’s comment on the draft bill saw him take a stance opposed to that of Securities and Exchange Commission (SEC) Chair Gary Gensler. The controversial SEC Chair believes that all forms of stablecoins should be registered and regulated.
Powell, like most officials, believed the crypto market had suffered an irreparable loss last year following the decline of top organizations like FTX and Terra. However, the FED chair admitted today that the market “appears to have some staying power.”
Powell also clarified that the central bank is a long way from establishing a CBDC, contrary to recent reports. He also claimed that the central bank has no plans to manage retail accounts if the FED were to launch a digital dollar.
