Federal Reserve Chairman Jerome Powell believes that there is no need for cryptocurrencies if there is a digital dollar. “I think that’s one of the stronger arguments in its favor,” he said. The Fed chair also insists that the U.S. is not in danger of losing its reserve currency status.
Fed Chair Powell Thinks Cryptocurrencies Aren’t Needed When There Is Digital Dollar
Federal Reserve Chairman Jerome Powell talked about cryptocurrencies, stablecoins, and a digital dollar during a congressional hearing before the U.S. House of Representatives Financial Services Committee Wednesday.
During the hearing, Rep. Stephen Lynch from Massachusetts asked if a “swift action” on the Fed’s digital currency would “calm” the markets and whether a digital dollar would be a more viable alternative than having thousands of cryptocurrencies or stablecoins emerge in the payments system.
“I think that may be the case. I think that’s one of the arguments that are offered in favor of digital currency,” Powell replied, elaborating:
In particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favor.
Responding to a different question, Powell noted that stablecoins are a lot like money market funds or bank deposits “but without the regulation.” He opined: “We have a tradition in this country where the public’s money is held in what is supposed to be a very safe asset. We have a pretty strong regulatory framework around bank deposits, for example, or money market funds. That doesn’t exist really for stablecoins.”
Rep. Lynch also raised concerns about the “slowness” of digital dollar development citing that many central banks worldwide are progressing faster than the U.S. in this area.
Powell replied: “I think this is the beginning of an accelerating decision process. We have a lot of work left to do on the technical side and on the policy side, but a critical part of it is just public consultation.” He emphasized: “I’m really concerned about getting this right … I think it’s way more important to get it right than it is to get it fast.”
The Fed chairman also addressed Lynch’s concerns about the U.S. losing its reserve currency status. “On reserve currency, the U.S. is the reserve currency,” Powell insisted:
There really isn’t a good competitor out there. All the things you need to be a reserve currency, the United States has it … We are not in danger of losing it, certainly not to China.
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