Federal Reserve Chairman Jerome Powell’s testimony at a hearing before the Senate Banking Committee on Tuesday may have brought some good news to Crypto enthusiasts.
Jerome Powell mentioned that while crypto’s caused trouble lately, “we have to be open to the idea that – somewhere in there – there is technology that can be featured in productive innovation that makes people’s lives better” and that he didn’t want to “stifle innovation.”
Powell was asked to talk about cryptocurrency multiple times during his testimony which will continue on Wednesday before he noted that crypto is “quite tumultuous,” with some of the biggest companies in the sector collapsing due to fraud.
He also noted that “we see in crypto activity lots of things that suggest that regulated financial institutions should be quite cautious in doing things in the crypto space.”
These statements reflected the Fed’s stance on cryptocurrencies, where they’ve previously issued multiple warnings to banks that deal with cryptocurrencies closely. Reiterating that banks looking to run businesses within crypto will probably not meet safety-and-soundness standards, which are critical to be able to continue to operate in America.
Silvergate Bank only reinforces The Fed’s belief of crypto’s dangers as most of its crypto customers have withdrawn their deposits from the troubled institutions.
Jerome Powell on Stablecoin Instability
Jerome Powell wants Congress to provide a legal framework for digital assets in the U.S., directly mentioning stablecoins as an area that needs supervision.
“People will assume that something that looks like money or a money market fund is regulated the same way money and financial institutions are. And so stablecoins need some attention in that respect,” said Powell.
However, Powell added that there is a place for stablecoins within finance if they get appropriate regulation. But he later put a damper on things when he argued that
“There are real concerns about permissionless public blockchains, and the reason is that they’ve been so susceptible to fraud, to money laundering and all of those things.”