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Powell says a Fed digital currency could undercut need for cryptocurrencies

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NEW YORK: Federal Reserve Chair Jerome Powell on Wednesday (Jul 14) mentioned one of many stronger arguments for the US central financial institution to arrange a digital forex is that it might undercut the necessity for personal alternate options reminiscent of cryptocurrencies and stablecoins.

Requested throughout a congressional listening to if having a digital forex issued by the Fed can be a extra viable various than having a number of cryptocurrencies or stablecoins emerge within the funds system, Powell mentioned he agreed.

“I believe which may be the case and I believe that’s one of many arguments which can be provided in favour of digital forex,” Powell mentioned throughout a listening to earlier than the US Home of Representatives Monetary Providers Committee. “That, specifically, you wouldn’t want stablecoins, you wouldn’t want cryptocurrencies should you had a digital US forex – I believe that’s one of many stronger arguments in it’s favour.”

Fed officers might be broadly inspecting the digital funds universe in a dialogue paper that might be launched in early September, Powell mentioned. He described it as a key step that accelerates the Fed’s efforts to find out if it ought to difficulty its personal digital forex.

Powell mentioned he was sceptical that crypto property would turn out to be a foremost funds automobile in america however mentioned stablecoins may acquire extra traction. Nevertheless, he mentioned extra regulation is required earlier than stablecoins might tackle a much bigger function within the monetary system.

“We’ve got a fairly robust regulatory framework round financial institution deposits, for instance, or cash market funds,” Powell mentioned. “That doesn’t exist at the moment for stablecoins, and in the event that they’re going to be a big a part of the funds universe – which we don’t assume crypto property might be however stablecoins could be – then we want an applicable regulatory framework.”

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