The Federal Reserve Chair Jerome Powell is calling for regulation of stablecoins.
- Federal Reserve Chair Jerome Powell spoke at a panel hosted by the Bank of France on Tuesday.
- Following the collapse of the stablecoin Terra in May, Powell has joined other voices in Washington in calling for greater regulation of decentralized finance (defi).
- “Within the defi ecosystem, there are these very significant structural issues around transparency—lack of transparency,” says Powell.
- “If people are going to think something is money, then it needs to actually have the qualities of money. If it doesn’t, then I don’t think you want to take money and make it into just another consumer product where sometimes it fails and sometimes it’s good.”
- “We need to be very careful about how crypto activities are taken within the regulatory perimeter…there’s a real need for more appropriate regulation so that as decentralized finance expands and starts to touch more and more retail customers, appropriate regulation is in place.”
- “He added that while stablecoins, a crypto asset that attempts to peg its value to a conventional currency such as the U.S. dollar, are quite different from unbacked crypto assets, they too require careful monitoring,” says Reuters.
Why it’s important
The speech though is another indication that the federal government is interested in cracking down on crypto. The federal government sees some necessity in bringing greater consumer protections and other regulations into crypto markets.
Crypto has been highly unstable in 2022. Major coins like bitcoin and ethereum, generally seen as safer and less volatile, have respected lost 70.3% and 71.2% of their value since November 2021.
The Fed’s new interest rate hikes have also contributed to a decline in crypto markets.
“The Fed’s sharp interest rate increases this year … have contributed to the collapse of some stablecoins and big drops in the value of cryptocurrencies, a phenomenon some traders have dubbed ‘crypto winter’… In May, the stablecoin TerraUSD collapsed, wiping out $40 billion in investor funds,” says AP.
As we reported yesterday, a recent court order from the Department of Justice to the IRS has authorized actions against individuals who fail to report and pay taxes on their crypto earnings.
The White House has also pressured the U.S. Securities and Exchange Commission to further tighten regulations on crypto.