During a hearing before the House Financial Services Committee on Thursday, Federal Reserve chairperson Jerome Powell stated that, while a central bank digital currency (CBDC) might replace stablecoins, he does not intend to outlaw the digital tokens.
Representative Ted Budd (R-NC) asked Powell to expand on his statement about cryptocurrencies during his previous testimony before the Committee in July.
“You wouldn’t need stablecoins; you wouldn’t need cryptocurrencies if you had a digital US currency,” Powell said then. “I immediately realized that I had misspoken,” the central bank chairman said, referring to his previous comments. “Take the word ‘cryptocurrency’ out of that sentence.”
Powell explained Thursday that stablecoins currently fill a role that a central bank digital currency could occupy if approved. He believes it’s “fairly widely accepted” that a central bank’s digital currency can perform many of the same functions.
“I have no intention to ban them, but stablecoins are like money market funds, they’re like bank deposits, but they’re, to some extent, outside the regulatory perimeter, and it’s appropriate that they be regulated,” Powell claimed. “Same activity, same regulation.”
The remarks come amid an intriguing regulatory climate for digital assets, as various regulatory groups wrestle with jurisdiction over the new asset class. Following Powell’s comments, cryptocurrency markets mostly rose: Bitcoin and ETH went up over 6 percent.
The Thursday hearing also rose to question the issue of financial privacy, with three representatives – Reps. David Kustoff, Trey Hollingsworth, and Rep. William Timmons – expressing uneasiness about the IRS’s push to pass new regulations obliging banks to report annual inflows and outflows from all accounts with balances greater than $600. Treasury Secretary Janet Yellen confirmed the IRS’s plans, saying they were required to close a $7 trillion tax gap.
“Yes, we have proposed both augmenting the resources of the IRS so that the IRS gets insight into opaque sources of income.”