Federal Reserve Chairman Jerome Powell appears to have reversed one of his previous positions on the relationship between CBDCs and stablecoins. Testifying before the US Congress, he suggested that the two could coexist, without the former changing Congress.
Allowing Stablecoins and CBDCs.
Powell discussed the possibility of the Federal Reserve issuing a CBDC during his nomination hearing on Tuesday. Republican Senator Pat Tomei – a well-known crypto advocate – asked whether a Fed-issued CBDC would prevent the existence of “well-regulated, privately issued stablecoins.”
“No, not at all,” replied Powell.
From what we heard from Powell last year, it’s a far less aggressive approach to stablecoins. In July, he suggested that the primary benefit of CBDCs would be to replace crypto – including stablecoins. That said, Powell has no intention of outright banning other cryptocurrencies, setting a US regulatory approach apart from China.
Still, stablecoins are a hot topic among regulators right now. Both industry leaders and Congressmen presented conflicting views on the subject during a hearing last month. While the industry considers stablecoins to be a complement to the financial system, Maxine Waters suggested that they could be a threat to the US dollar. Some even doubt whether stablecoins can be classified as securities.
Other questions exist regarding the practical utility of privately issued stablecoins if a CBDC exists. However, issuing a CBDC is still a long way off. Powell previously stated that he “does it right rather than do it fast”, leaving room for Tether, Pax and USDC to work in its absence.
The Fed plans to release a report over the next few weeks examining the pros and cons of implementing CBDCs.
to address inflation
The most widely discussed topic during the hearing was inflation, which has become the Fed’s top priority since hitting a 40-year high in November. Powell said that with inflation well above the target, the economy “doesn’t need or want the overly liberal policies we have now.”
The chairman has continued to indicate that the Fed will prioritize raising interest rates as quickly as possible to tackle the issue.
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