Federal Reserve Chairman Jerome Powell argued for the need for strong central-bank oversight in stablecoin regulations being crafted by lawmakers in the House Financial Services Committee.
"We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank," Powell said in testimony today at a twice-yearly hearing on monetary policy. "We believe it would be appropriate to have quite a robust federal role."
Powell also noted that the Fed's staff has been involved in talks with lawmakers from both parties on the crypto legislation members of the committee have been working on. He observed in his testimony that the industry "appears to have some staying power," though Powell also suggested the market has fallen sharply since last year.
The panel, led by Chairman Patrick McHenry (R-N.C.), will be marking up two crypto bills in late July, McHenry said at the opening of the hearing. A markup is an open session that invites debate or edits to the details of a bill before it gets a committee vote, and McHenry said he’s scheduling the much-debated stablecoin legislation and a wider bill that would set the overall market structure and oversight for cryptocurrencies in the U.S.
Significant crypto legislation hasn’t yet cleared a committee in either the House or Senate in the years such efforts have been discussed.
In questioning Powell, the committee’s ranking Democrat, Rep. Maxine Waters (D-Calif.), said the latest legislative proposal from Republicans would leave the Fed “severely hamstrung” and that it needs to establish a strong federal floor for oversight of nonbank stablecoin issuers. That’s been a sticking point since negotiations began in earnest last year, because Republicans have sought to ensure a major role for states as stablecoin watchdogs.
Powell also addressed the debate over whether the U.S. should establish a central bank digital currency, saying "We're a long way from this."
If the Fed were to set up a digital dollar, Powell said the central bank has no interest in managing retail accounts.
"We would not support accounts at the federal reserve by individuals," he said. Instead, such accounts would be managed through the banking system, Powell said.
UPDATE (June 21, 2023, 15:53 UTC): Adds Powell testimony on establishing a U.S. digital dollar.
UPDATE (June 21, 2023, 18:15 UTC): Adds Powell comment on crypto industry health.
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