The Federal Reserve chair, Jerome Powell, has clarified previous remarks about cryptocurrency, saying that he does not want to ban it. In a hearing before the House Financial Services Committee, Powell said he “misspoke” on the need to regulate cryptocurrencies.
“I didn’t mean to take the word cryptocurrency out of that sentence,” he said. “I would say it’s fairly widely understood that central bank digital currencies could perform some of the stablecoins are like money market funds, like bank deposits, and it’s appropriate that they be regulated. Same activity, same regulation.”
In addition to Powell, other officials have discussed stablecoin regulations. Janet Yellen recently said stablecoins need to be regulated under some kind of framework. There were plans in the U.S. to make recommendations on how to seal the unstablecoin regulations’ countless loopholes. Yellen had met earlier in the year with the President’s Working Group (PWG) on financial markets, with the meeting turning towards the importance of having eCurrency rules for stablecoins.
The Fed grappled with how to cope with the scaling back of the low-interest rates from the pandemic era in July. Over the summer, high inflation and the rise of the delta variant complicated things. There were concerns at the time about slowing down the $120 billion in bond purchases every month, which had been put in place to keep long-term rates low.
Powell had wanted to stage a bet by keeping the Fed’s short-term benchmark close to zero, as it had been since March 2020, to wait for the job market to heal. The economy was doing well at the beginning of the summer as COVID seemed to be waning, with people making more plans and going out more, stimulating the economy. But the delta variant formed a bump in the road as it caused some people to shy away from going out as much.
“We could be seeing the beginning of some de-correlation with traditional markets here,” said Vijay Ayyar, Asia-Pacific managing director at cryptocurrency exchange Luno Pte Ltd. “Early to say though. But that whole narrative that didn’t play out all of last year might just be taking shape. Especially since a lot of the uncertainty with regard to the U.S. debt ceiling, China clampdown, etc. Crypto seems to be in its own bull cycle and continuing higher.”