In a recent hearing on Fed policy, Federal Reserve Chair Jerome Powell expressed his support for considering payment stablecoins as a form of money, highlighting the importance of robust federal regulation. Powell’s stance emerged amidst discussions surrounding a proposed stablecoin bill introduced by Representative Maxine Waters, which has received mixed reactions and sparked debates within the crypto community.
The bill, initially put forth by Republicans, aims to establish comprehensive crypto legislation in the United States. However, Democrats, led by Representative Stephen Lynch, have voiced doubts about the bill’s relevance, questioning the necessity of stablecoins and criticizing the draft language as outdated. Lynch argued that the bill fails to incorporate lessons learned from the challenges faced by major crypto firms in the past year.
During the hearing, Waters raised concerns about the bill’s provision for state-level licensing, warning against the potential proliferation of licenses and fragmented regulatory oversight. Chair Powell echoed her apprehensions, stating that extensive private money creation at the state level would be a mistake. He emphasized the need for a strong federal role in regulating stablecoins to mitigate risks and ensure consistency across jurisdictions.
We do see payment stablecoins as a form of money, […] and we believe that it would be appropriate to have quite a robust federal role in what happens in stablecoin going forward.
Fed Chair Jerome Powell.
Powell’s position diverges from the stance of Securities and Exchange Commission (SEC) Chair Gary Gensler, who has previously suggested that most stablecoins should be treated as securities, subject to registration and regulation. Additionally, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam has advocated for classifying stablecoins as commodities. These contrasting viewpoints reflect the complexity of stablecoin regulation and the challenges of finding a unified approach.
Although there is no readily available definition of money from the Fed, it is generally understood to be a medium of exchange. According to American law, commodities are “goods and articles […] and all services, rights, and interests […] in which contracts for future delivery are now or will be dealt in.” A security has a much more nuanced definition.
Former CFTC Chair Chris Giancarlo also weighed in on the bill, expressing concerns about potential government overreach. He warned against allowing government licensing authorities the discretion to deny services to lawful but politically disfavored businesses, drawing parallels to the controversial Operation Choke Point. Giancarlo stressed the need to prevent stablecoin transactions from being influenced by shifting political winds, advocating for non-discriminatory licensing conditions.
The regulation of stablecoins has emerged as a priority for US financial agencies due to concerns about their impact on financial stability. While both parties agree on the need for regulation, disagreements persist regarding the extent and approach. Key to the bill’s success is the support of Senator Sherrod Brown, chairman of the Senate Banking Committee, who has yet to disclose his stance. Some Democrats within the committee argue against tailored oversight, deeming the sector too risky to warrant leniency.
The ongoing debates surrounding stablecoin regulation highlight the complexity of the issue and its potential impact on the broader crypto sector in the United States. As discussions continue and the push for a comprehensive regulatory framework gains momentum, finding a balance between oversight and innovation remains a crucial task.
Note: The above news article has been generated by the AI model and should be reviewed by a human editor for any errors or omissions before publishing.