Last Wednesday, Federal Reserve Chairman Jerome Powell highlighted the need to regulate stablecoins, categorizing them as a “form of money,” at a hearing at the House Financial Services Committee.
Powell's statements, beyond of influencing conventional markets, brought promising perspectives to the world of cryptocurrencies.
Stablecoins, digital assets whose value tends to be stable because they are linked to some standard, were the focus of discussions with committee members. For Powell, the potential of stablecoins as a means of payment is linked to the reliability that a central bank can provide.
On the possibility of issuing digital currencies by central banks (CBDCs), the president of the Fed advocated for a “pretty robust federal role” in regulating stablecoins, as the ultimate source of monetary credibility in advanced economies is the central bank.
However, this regulatory stance raises privacy concerns. Representative Zack Nunn, R-Iowa, questioned the protection of users' privacy should the US adopt a CBDC. Nunn voiced apprehension about the Fed's unrestricted access to Americans' spending habits.
In response, Powell assured that individual accounts would not be managed directly by the Federal Reserve. He explained that if a CBDC is implemented, it will be brokered through the banking system.
Despite the focus of Powell's statements being stablecoins and CBDCs, market cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) reacted positively. On Wednesday, both cryptocurrencies rose by around 6% respectively. This increase was attributed to clear signs of institutional interest.
