Powell did not provide details on what kinds of regulations might be needed. He did he said that they should follow the principle of “same activity, same regulation”which means that transactions outside the traditional banking system should be regulated in the same way as when they are executed by banks.
Earlier this month, President Joe Biden signed an executive order directing the Treasury Department and other federal agencies to study the impact of cryptocurrencies on financial stability and national security.
Americans who buy stablecoins or cryptocurrencies “They may not fully understand the extent of their potential losses, or that these investments generally lack the government protections that come with many of the traditional financial instruments and services they are used toPowell said.
Surveys show that roughly 16% of adult Americans, or 40 million people, have invested in cryptocurrencies. And 43% of men aged 18-29 have invested their money in cryptocurrencies. The Fed is also trying to figure out how digital assets like Bitcoin could affect financial markets, particularly during recessions or market crashes.
“We don’t know how some digital products will behave in times of market stress, which could lead to large destabilizing flows, nor do we know how stresses in crypto markets could potentially spill over into the traditional financial system.”he added.
One concern with stablecoins is that while many promise to hold $1 in value, it is not always clear whether stablecoin issuers have enough cash to redeem each stablecoin they issue for $1.
Powell also noted that crypto assets have been used for “illicit activities” such as money laundering, and “we need to prevent this so that the innovations that survive and attract wide adoption are those that deliver value over time” for legal uses. .
Source: Ambito
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