Stable coins need stricter regulations in order to be part of the payment universe.
Jerome Powell Fed Chairman told the House of Representatives today that stable coins should have stricter regulations similar to money market funds or bank deposits.
The Chairman was asked specifically about Tether which is at the moment the most valuable stable coin. Tether claimed each coin was supported by a dollar but has been proven wrong and is rather supported commercial paper or debts. Powell said most of the time those assets are very liquid, but during the recent financial crisis that wasn’t the case. He explained:
“The market just disappears. And that’s when people will want their money. These are economic activities very similar to bank deposits and money market funds, and they need to be regulated in comparable ways,”
Powell went on to say that if Stable coins are going to be a part of the payment universe, then regulations need to be put in place due to the fact that a regulatory framework currently doesn’t exist, for stable coins.”
He added that he doesn’t see volatile crypto assets as being a part of the payment universe in the future. Crypto assets were mentioned in the 75 page Monetary Policy Report released last Friday. They call out was merely a single sentence, mentioned in the context of “risky assets,”
