Federal Reserve Chair Jerome Powell said there are potential risks from stable coins and that they require regulation to ensure their safety.
Powell told the House Financial Services Committee on Wednesday that stable coins are a lot like money market funds or bank deposits “but without the regulation.”
“We have a tradition in this country where the public’s money is held in what is supposed to be a very safe asset. We have a pretty strong regulatory framework around bank deposits, for example, or money market funds. That doesn’t exist really for stable coins,” he said during semi-annual testimony on the U.S. economy.
Fed officials including Boston Fed President Eric Rosengren have highlighted potential growing risks from stable coins including Tether. During a recent presentation, Rosengren pointed out a slide showing Tether’s underlying assets that included commercial paper, secured loans, corporate bonds and precious metals; effectively “this is a very risk prime fund,” Rosengren said.
Powell echoed the need for oversight.
“If they are going to be a significant part of the payments universe — which we don’t think crypto assets will be but stable coins might be — then we need an appropriate regulatory framework, which frankly we don’t have,” he said.
— Steve Matthews (Bloomberg-Mercury)