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Jerome Powell: I'm 'Undecided' on the Benefits of CBDCs
The Federal Reserve chair said "the more direct route" would be to regulate stablecoins.
Updated Sep 14, 2021, 1:26 p.m. Published Jul 15, 2021, 2:29 p.m.
Stablecoin regulations may determine whether the U.S. gets a central bank digital currency.
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In response to a question from Sen. Pat Toomey (R-Pa.) during a Thursday hearing before the Senate Committee on Banking, Housing and Urban Affairs, U.S. Federal Reserve Chair Jerome Powell said that he was undecided on whether the benefits of central bank digital currencies outweigh the costs, and vice versa. He also said that "the more direct route" would be to regulate stablecoins.
"Our obligation is to explore both the technology and the policy issues over the next couple of years, so that we're in a position to make an informed recommendation," Powell said. "Again, my mind is open on this, and I honestly don't have a preconceived answer to these questions."
In response to a question from Sen. Cynthia Lummis (R-Wyo.), Powell expanded on his comments from yesterday before the House Financial Services Committee where he noted that a CBDC could make stablecoins and cryptocurrencies unnecessary.
The Chair conceded that cryptos like bitcoin and ethereum are no longer primarily payments mechanisms but act like investment vehicles.
"It's not that they didn't aspire to be payment mechanisms, but they've completely failed to become one except for people that desire anonymity," Powell said.
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IMF Flags Stablecoins as Source of Risk to Emerging Markets, Experts Say We Aren't There Yet
The IMF warns that USD-pegged stablecoins could undermine local currencies in emerging markets by facilitating currency substitution and capital outflows.
What to know:
- The IMF warns that USD-pegged stablecoins could undermine local currencies in emerging markets by facilitating currency substitution and capital outflows.
- Despite concerns, experts argue that the stablecoin market is still too small to have a significant macroeconomic impact.
- Stablecoins are primarily used for crypto trading, and their market size remains small compared to global currency flows.
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