Jerome Powell: Fed is Studying Risks of Stablecoins As A ‘Very High Priority’

Jerome Powell: Fed is Studying Risks of Stablecoins As A ‘Very High Priority’

Meanwhile, the central bank isn’t feeling the “urge or need to be first” on CDBC’s as they already got the first-mover advantage with the U.S. dollar being the reserve currency.

The US Federal Reserve Chairman, Jerome Powell, said on Thursday that the central bank needs to find “better regulatory answers” for global stablecoins, and it is their “high-level focus.”

“That’s been a high-level focus, and that will continue to be a high-level focus because they could become systemically important overnight,” Powell said while speaking at an online event hosted by Yahoo Finance and conducted by the Princeton economist Markus Brunnermeier in New Jersey.

“We don’t begin to have our arms around the potential risks and how to manage those risks. The public will expect that we do and have every right to expect that. So that’s something that we’ve been working on with our colleagues around the world… It’s a very high priority.”

Just last month, the U.S. President Trump’s Working Group on Financial Markets said stablecoins must meet the same regulatory standards as banks and other financial institutions.

European Central Bank President Christine Lagarde shared similar views when in November, she warned in an op-ed that if stablecoins became widely adopted, they could “threaten financial stability and monetary sovereignty” around the world.

This week, she called Bitcoin a “highly speculative asset” that is facilitating “funny business.” As such, “there has to be regulation,” Lagarde added, “This has to be applied and agreed upon.”

No Need for CBDC Yet

The Fed, meanwhile, is in no hurry regarding a central bank digital currency (CBDC); it is actually estimated to take “years rather than months” before the central bank releases a CBDC, said Powell. “We don’t feel an urge or need to be first” on CDBCs, reiterated Powell while continuing,

“Effectively, we already have a first-mover advantage because (the U.S. dollar is) the reserve currency.”

Still, the Fed is “investing heavily” in understanding the technology and studying all the policy risks CBDCs pose.

According to him, it was when private-sector money, like Bitcoin and other cryptos, was created that the Fed looked into CBDC. But while people think of these cryptocurrencies as money, “at some point, they find out that it’s not money and that’s a really bad thing we need to avoid,” he said.

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Author: AnTy

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