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Powell: Digital currencies will require new regulations

cryptonews100_tggfrn by cryptonews100_tggfrn
March 23, 2022
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Powell: Digital currencies will require new regulations
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Federal Reserve Chair Jerome Powell mentioned Wednesday that new types of digital cash reminiscent of cryptocurrencies and stablecoins current dangers to the U.S. monetary system and will require new guidelines to guard customers

By CHRISTOPHER RUGABER AP Economics Author

March 23, 2022, 2:21 PM

• 3 min learn

WASHINGTON — Federal Reserve Chair Jerome Powell mentioned new types of digital cash reminiscent of cryptocurrencies and stablecoins current dangers to the U.S. monetary system and will require new guidelines to guard customers.

Powell, talking Wednesday on a panel organized by the Financial institution for Worldwide Settlements, a world group of central bankers, additionally mentioned that new applied sciences will possible make digital funds cheaper and quicker. However they may additionally destabilize present monetary establishments, he mentioned.

“Our present regulatory frameworks weren’t constructed with a digital world in thoughts,” he mentioned. “Stablecoins, central financial institution digital currencies, and digital finance extra typically, will require modifications to present legal guidelines and regulation and even completely new guidelines and frameworks.”

Stablecoins are a sort of cryptocurrency normally tied to the greenback or a commodity reminiscent of gold. Central financial institution digital currencies are digital types of {dollars} or different currencies, issued by governments. The Fed is researching digital {dollars} however has not but decided on whether or not to concern one. It launched a research on stablecoins in January.

Powell didn’t present any particulars of what sort of regulations could be wanted. He did say that they must observe the precept of “similar exercise, similar regulation,” that means that transactions exterior the standard banking system must be regulated the identical as they’re when executed by banks.

Earlier this month, President Joe Biden signed an govt order directing the Treasury Division and different federal businesses to review the influence of cryptocurrency on monetary stability and nationwide safety.

His order got here as a number of Democratic senators, together with Elizabeth Warren from Massachusetts, have raised considerations that crypto could possibly be used to evade U.S. sanctions on Russia.

In his remarks, Powell outlined a number of dangers that stem from the expansion of digital finance, together with to customers and the broader monetary system.

People who purchase stablecoins or crypto “might not totally perceive the extent of their potential losses, or that these investments typically lack the federal government protections that accompany most of the conventional monetary devices and companies that they’re used to,” Powell mentioned.

Surveys present that roughly 16% of grownup People — or 40 million individuals — have invested in cryptocurrencies. And 43% of males age 18-29 have put their cash into cryptocurrency.

The Fed can also be making an attempt to determine how digital belongings like Bitcoin would possibly influence monetary markets, significantly throughout downturns or market crashes.

“We don’t know the way some digital merchandise will behave in instances of market stress, which might result in massive destabilizing flows, nor do we all know how stresses in crypto markets might probably spill over into the standard monetary system,” Powell mentioned.

One concern relating to stablecoins is that, whereas many promise to keep up a price of $1, it isn’t at all times clear if stablecoin issuers have adequate money to redeem every stablecoin they concern for $1.

Powell additionally famous that crypto belongings have been used for “illicit exercise,” reminiscent of cash laundering, and “we have to forestall this in order that the improvements that do survive and do entice broad adoption are people who present worth over time” for authorized makes use of.

Powell mentioned the Fed has “lengthy supported accountable innovation,” although he added that it’s troublesome to inform which improvements “will have lasting results and people who will prove largely to be hype.”

“And it’s by no means potential in actual time to make sure which is which,” he mentioned.



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