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Jerome Powell Says the Federal Reserve Will Not Ban Crypto Like China



Jerome Powell says USA will not ban cryptocurrency

Jerome Powell, the Chair of the US Federal Reserve, claims the authority does not plan to follow in China’s footsteps of banning cryptocurrencies. He said this while responding to Representative Ted Budd, who asked whether the regulator intends to ban cryptos like China. Reportedly, Powell spoke during a hearing of the House Committee on Financial Services on the response of the Treasury Department and Federal Reserve to the COVID pandemic.

In the hearing, Representative Budd mentioned Powell’s statement in July when he said the development of a digital dollar might make stablecoins and crypto obsolete. Clarifying the agency’s stance, Powell said he specifically mentioned stablecoins, not all digital currencies.

According to him, stablecoins are similar to money market funds and bank deposits. However, they lie outside the purview of the regulatory scope to some extent. As such, he recommended that the same rules that govern money markets apply to stablecoin.

Powell expressed worry over Tether (USDT), saying the stablecoin is not fully backed by US dollar reserves. As a result, it becomes a problem when markets are not liquid, and people start demanding their funds. He added that regulating the stablecoin industry would ensure investors get their money safely during a crisis.

Efforts to Rein In the Stablecoin Sector

Like Powell, Senator Cynthia Lummis, a crypto-friendly legislator, also voiced concerns over stablecoins. According to her, only depository institutions or money-market funds, or similar vehicles should issue stablecoin. Senator Lummis also noted that stablecoins should be fully backed by cash and cash equivalents, adding that the coins should be subject to regular audits.

As concerns over stablecoins loom, Powell has been working with Janet Yellen, the Treasury Secretary, to release a draft of stablecoin regulations. The duo is set to release the draft in the coming weeks. Reportedly, this draft only focuses on stablecoins and does not touch on digital assets like Bitcoin (BTC) and Ethereum (ETH).

This further proves that the Federal Reserve’s approach differs from the People’s Bank of China (PBoC) because the latter introduced a blanket ban on cryptos.

Rohan Grey, a law professor that helped draft the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act, also shared that the Federal Reserve is not taking the same measures as PBoC. He noted that Powell does not have the means to ban crypto. However, if the US central bank proposed the banning of cryptos, it would trigger a broader regulatory and Congressional debate on the matter.

Meanwhile, the crypto market has rebounded after the Iranian government greenlighted licensed crypto mining firms to resume operations after a three-month ban. At the time of writing, BTC is changing hands at $47,271.74 after climbing 9.71% over the past 24 hours. The altcoins market is also green, with ETH gaining 9.19% over the past 24 hours to trade at $3,232.33.

Jinia is a fintech writer based in Sweden focusing on the cryptocurrency market and blockchain industry. Besides Cryptotelegram, she has been writing for some renowned publications such as Cointelegraph, Invezz, etc for years. She also has experience in writing about the iGaming industry.