Federal Reserve Chairman Jerome Powell affirmed the long-term viability of cryptocurrency as an asset class in the United States economy. During his testimony before the House Financial Services Committee, Powell addressed questions about crypto and stablecoins, expressing his views on their importance and the need for federal involvement in regulating stablecoins.
Congressman Warren Davidson (R-OH) highlighted the current market cap of cryptocurrency, estimated at around $1.1 trillion, and inquired about its staying power in the U.S. economy. Powell cautiously acknowledged that it appears to have enduring value, noting that the market cap was significantly higher a year ago.
Davidson attributed the market's volatility to the lack of regulatory clarity and emphasized the committee's efforts to rectify this situation by introducing bills, including one specifically focused on stablecoins.
Rep. Maxine Waters (D-CA) raised concerns about stablecoins and proposed a bill that would grant federal regulatory approval for only two licenses, while leaving the remaining 56 licenses to be issued by individual states with minimal federal oversight. Powell responded by affirming that payment stablecoins are indeed a form of money, and he advocated for a robust federal role in shaping their future.
Powell stressed that weak oversight and excessive private money creation at the state level would be detrimental, highlighting the central bank's role in ensuring the credibility of money. He further stated that the Federal Reserve's staff has been engaged in discussions with lawmakers regarding crypto legislation.
During the hearing, Chairman Patrick McHenry (R-N.C.) announced that the committee plans to review two crypto bills later in July, including the stablecoin legislation and a comprehensive bill addressing the overall structure and oversight of cryptocurrencies in the United States.
Rep. Maxine Waters expressed concerns about the Republican proposal, arguing that it would severely limit the Fed's oversight capabilities. She emphasized the need to establish a strong federal foundation for overseeing nonbank stablecoin issuers.
Regarding the potential establishment of a central bank digital currency (CBDC), Powell remarked that it remains a distant prospect. He clarified that if a digital dollar were to be implemented, the Federal Reserve would not manage individual retail accounts directly, but instead, these accounts would be handled through the existing banking system.
