Fed President Jerome Powell reiterates urgency for cryptocurrency regulations
On Wednesday, Jerome Powell, chairman of the U.S. Federal Reserve (FED), reiterated his view that there is a growing need for cryptocurrency regulations during a speech to the House Financial Services Committee.
He said recent events in Ukraine “highlight the need for congressional action on digital finance, including cryptocurrencies.”
“We have this burgeoning industry which has many parts to it, and there isn’t in place the kind of regulatory framework that needs to be there,” he said in response to questions about how Russia might be using crypto to evade sanctions.
In July 2021, Powell told Congress that stablecoins (crypto tokens that are backed by fiat currencies such as the dollar) should be regulated “in a similar way” to bank deposits and money market mutual funds.
“Commercial paper are short-term overnight obligations from companies, and most of the time they’re investment grade, most of the time they’re very liquid, it’s all good. But during recent financial crises, the market just disappears,” he explained.
“That’s when people will want their money. It’s very simple: these are economic activities very similar to bank deposits and money market funds, and they need to be regulated in comparable ways.”
Also, in January, Powell said that the Fed would soon release a report on central bank digital currencies (or CBDCs) and cryptocurrencies.
Elsewhere in the US regulatory sphere, Gary Gensler, chairman of the US Securities and Exchange Commission (or SEC), has repeatedly warned of the need for stricter crypto regulations.
In 2021, he warned that Decentralized Finance (or DeFi) – tools that enable non-custodial trading of cryptocurrencies without intermediaries – could “go bad” without better consumer protection laws.
Earlier, he had also said that the DeFi industry could be littered with unregistered securities.