Federal reserve chair Powell emphasizes need for strong oversight of US stablecoins

Federal Reserve Chairman Jerome Powell reiterated the need of robust central-bank oversight in the ongoing development of stablecoin regulations by the House Financial Services Committee.

Powell further disclosed that the Federal Reserve’s staff has been actively engaged in discussions with lawmakers from both sides of the aisle regarding the cryptocurrency legislation currently under consideration by committee members.

Two crypto bills underway

During a twice-yearly hearing on monetary policy, Federal Reserve chairman Jerome Powell expressed his perspective on payment stablecoins, stating, “We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank.”

Powell emphasized the necessity of a strong federal role in overseeing stablecoins, indicating that he believes it would be appropriate to establish robust federal oversight in this domain.

During the hearing, chairman Patrick McHenry (R-N.C.) also announced that the panel would be conducting a markup session in late July for two crypto bills, including the highly debated stablecoin legislation and a comprehensive bill focused on establishing market structure and oversight for cryptocurrencies in the U.S.

This marks a significant step as no major crypto legislation has successfully advanced through a committee in either the House or Senate in previous years. 

Rep. Maxine Waters (D-Calif.), the committee’s ranking Democrat, expressed concerns about the Republican’s legislative proposal, stating that it would severely limit the Federal Reserve’s authority and emphasized the need for a strong federal oversight for nonbank stablecoin issuers.

Chairman Powell also weighed in on the debate, acknowledging that the discussion around establishing a central bank digital currency is still in its early stages. He clarified that if the Federal Reserve were to develop a digital dollar, it would not involve managing retail accounts.

Stablecoins may be next go be underfire

The timing represents interesting correlation to a research report, in which, investment bank Berenberg suggested that the U.S. Securities and Exchange Commission (SEC) is likely to expand its enforcement efforts to encompass decentralized finance (DeFi) and stablecoins.

According to CoinDesk, Berenberg identified tether (USDT) and USD coin (USDC), the two largest stablecoins in terms of market capitalization, as potential targets for the SEC. Together, these stablecoins hold a combined value of $110 billion.

Berenberg analysts, led by Mark Palmer, stated that if the SEC were to focus on USDT and USDC, it would effectively be targeting “the stablecoins that serve as the lifeblood of decentralized finance.”

They further explained that this move could be a strategic priority for the SEC, as it seeks to diminish DeFi’s potential to emerge as a viable alternative to regulated exchanges and lenders.