The Chairman of the United States Federal Reserve (US Fed), Jerome Powell, has come out and said they are looking at regulating private sector payment methods, specifically dollar-backed stablecoins within the United States.
This new direction comes following a growing interest and use in stablecoins, especially those pegged to the U.S. dollar.
Speaking on the developments and the evolution of the U.S. Payments System in light of the emergence of cryptocurrencies and stablecoins, Powell said:
“Recently, the rise of distributed ledger technology, which offers a new approach to recording ownership of assets, has allowed for the creation of a new financial products and services, including cryptocurrencies.
To date, cryptocurrencies have not served as a convenient way to make payments, given among other factors, their swings in value. Nonetheless, coins tied to the value of the dollar or another currency, known as stablecoins, have emerged as a new way to make payments.
These stablecoins aim to use new technologies in a way that has the potential to enhance payment efficiency. speed up settlement flows, and reduce end-user costs, but they may also carry potential risks to those users and to the broader financial system.
For example, although the value of a stablecoin may be tied to the value of a dollar, these coins may not come with the same protections as traditional means of payment such as physical currency or the deposits in your bank account.
Therefore as stablecoins use increases, so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries.”
– Chairman, US. Federal Reserve
This latest statement comes at a time when other American financial regulators are considering establishing an ‘inter-agency policy sprint team’ to address fragmented cryptocurrency regulations.
The financial regulators in question are:
The Office of the Comptroller of the Currency (OCC)
The U.S. Federal Reserve
The Federal Deposit Insurance Corporation
The Office of the Comptroller of the Currency, announced that the agency has been in talks with the U.S. Federal Reserve and the Federal Deposit Insurance Corporation about setting up an “interagency policy sprint team” focused “just on crypto.”
The statement also comes at a time when the United States Department of the Treasury is calling for exchanges and custodians to report crypto transactions greater than $10, 000 to the Internal Revenue Service (IRS).
About U.S. Federal Reserve
The Federal Reserve System is the Central Bank of the United States.
It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.
The Federal Reserve is responsible for:
Conducting the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy
Promoting the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad
Promoting the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole
Fostering payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments
Promoting consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.