Jerome Powell, chairman of the Federal Reserve, appears to have reversed his earlier position on the relationship between CBDCs/stablecoins. He testified before the US Congress and suggested that they could co-exist without the former being replaced.
Stablecoins, CBDCs and other CBDCs.
Powell spoke out about the possibility of a Federal Reserve-issued CBDC at Tuesday’s renomination hearing. Republican Senator Pat Toomey, a crypto advocate, asked if a Fed-issued CBDC would prevent the existence of private-issued stablecoins.
Powell replied, “No, not at any time.”
This attitude is far more positive than what Powell expressed last year about stablecoins. He suggested in July that the CBDC’s primary purpose would be to replace crypto, including stablecoins. Powell does not intend to ban other cryptocurrencies, which sets the US regulatory approach apart than China’s.
Stablecoins remain a hot topic for regulators. At a hearing last month, both industry leaders and congresspeople offered conflicting views on the topic. Maxine Waters suggested that stablecoins could pose a threat to US dollars. While the industry regards them as a complement to the financial system’s financial system, Maxine Wassers said they could be detrimental to it. Some people even believe that stablecoins might be considered securities.
There are other questions about the practical utility and legality of privately issued stablecoins, even if there was a CBDC. The issuance of a CBDC seems far off. Powell stated previously that he would rather do this right than fast, leaving space for USDC, Pax and Tether to continue operating in its absence.
Within the next few days, the Fed will release a report on the pros and cons to CBDC implementation.
Treatment of Inflation
Inflation was the most popular topic at the hearing. Since November’s near 40-year highs, it has been the Fed’s number one priority. Powell stated that the Fed’s inflation target is well beyond reach and that the economy no longer requires or wants the highly accommodative policies we have in place.
The Fed chairman reiterates that it will prioritise raising interest rates to address the problem as quickly as possible.
Marla Brooks – Financial Analysis
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