Federal Reserve Chair Jerome Powell addressed ongoing debates about crypto regulation while testifying before Congress on Tuesday.
- Fed Chair Powell testified before the Senate Committee on Financial Services on Tuesday and is scheduled to address the House of Representatives on Wednesday regarding the Federal Reserve’s success in addressing inflation.
- On the stand, Powell addressed the issue of crypto regulation, saying that he sees numerous risks with digital assets and encouraged wariness surrounding crypto investing.
- However, Powell affirmed that whatever crypto regulations are implemented should be taken carefully to avoid harming innovation or styling the regulation “in a way that just favors incumbents.”
- He advocated that Congress create a framework for digital assets that allows technological advancement, saying they should be regulated like traditional financial assets.
The issue of crypto regulation has become significant as the federal government demands greater regulation. Last year’s precipitous collapses of Terraform Labs, Celsius, Voyager, Three Arrows Capital, and FTX added urgency to the reaction. In the past few months, the White House, the Department of Justice, the SEC, and Congress have advocated cracking down on crypto.
Powell’s statement offers a note of conciliatory concern for crypto evangelists, who note that blockchain and decentralized finance offer advantages to central banking, as well as technological opportunities. That said, their calls for more individualized central regulations were mostly unheeded by Powell.
Backing Up A Bit
As we previously reported, Powell has joined other voices in Washington, D.C., calling for greater regulation of decentralized finance and stablecoins. Speaking at the Bank of France in September, he called for “appropriate regulation” as part of the White House’s call for greater consumer protections.
In January, the Fed, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency released a joint statement advising banks to be weary about holding or using cryptocurrencies, noting cryptocurrencies “raise significant safety and soundness concerns,” as Fortune notes.
“What we see is, you know, quite a lot of turmoil. We see fraud. We see a lack of transparency. We see run risk—lots and lots of things like that … We don’t want regulation to stifle innovation in a way that just favors incumbents and that kind of thing,” says Powell.