Jerome Powell Talks About Risks of Crypto, Push For New Regulation
According to the Fed Chair, Jerome Powell, cryptocurrencies and other digital technologies could be risky, and need enhanced regulations to work safely.
Jerome Powell, the Chairman of the Federal Reserve, believes the nation’s central bank supports innovation in digital financial products. However, he warned that certain technologies, including cryptocurrencies, could possess risks that have to be handled before their mass adoption.
During a panel hosted by the Bank of International Settlements (BIS), Powell noted that current financial regulations “were not built with a digital world in mind.”
He continued that regulations must be updated and newly created, clarifying that this applies to stablecoins, central bank digital currencies, and digital finance in general.
The US has been indecisive with its approach towards the digital assets industry, with President Biden signing an executive order earlier this month that stirred the pot further.
Powell outlined the need for new and improved rules that could capture the nature of crypto assets, which is a different asset class than stocks and bonds.
“There are potential financial-stability concerns for some products. We don’t know how some digital products will behave in times of market stress.”
He went on to say that it is “highly likely” that digital financial products, which are currently outside the regulatory perimeter, will soon be “brought within it.” Powell called it a necessary step to level the playing field, keep trust of users, and protect consumers.
He also commented that cryptocurrency investors may not understand that their investments lack the same protections as other investments, and that investors may not be aware of the full extent of their losses when making digital investments.
Last year, the Fed Chair reassured the crypto industry that the US has no intentions to implement an all-out ban on digital asset operations.
In January this year, Powell clarified his stance on the question whether a potential Fed CBDC would preclude the existence of privately-issued stablecoins, to which Powell responded “No, not at all.”
