As the U.S. looks for ways to regulate the crypto world, Federal Reserve Chairman Jerome Powell recently opined that if the U.S. launched a digital dollar, there would be no need for crypto.
According to Powell, the Fed is studying digital payments from crypto assets to stablecoins, which peg their value to a conventional currency such as the U.S. dollar. These payment mechanisms are at a “critical point in terms of the appropriate regulation,” Powell said in an interview with CNBC. Powell discussed seeking public input to respond to ideas of what good a central bank digital currency (CBDC) can do, and what the costs and benefits of it would be.
Powell seems to be leaning toward a digital dollar, much like the Digital Sand Dollar that Central Bank of the Bahamas launched earlier this year.
According to Powell, one of the stronger arguments for the U.S. central bank to set up a digital currency is that it could undercut the need for private alternatives such as cryptocurrencies and stablecoins, which can be unstable and difficult to regulate.
During a recent congressional hearing, Powell agreed that having a digital currency issued by the Fed would be a more viable alternative than having multiple cryptocurrencies or stablecoins emerge in the payments system, U.S. News reported.
“I think that may be the case and I think that’s one of the arguments that are offered in favor of digital currency,” Powell said during a hearing before the U.S. House of Representatives Financial Services Committee. “That, in particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favor.”
“We have a pretty strong regulatory framework around bank deposits, for example, or money market funds,” Powell said. “That doesn’t exist currently for stablecoins and if they’re going to be a significant part of the payments universe — which we don’t think crypto assets will be but stablecoins might be — then we need an appropriate regulatory framework.”
“CBDC will rule the game. Government can easily ban cryptocurrency citing money laundering and criminal activity” walid @realstreetttt responded on Twitter.
“And just like that crypto ended” @DragonFlyTrade1 tweeted.
Crypto allows privacy and little-to-no government oversight. “Lol these guys are clueless. We created crypto to opt out of your corrupt central banking system” Ad AstrA @EddieTowers777 noted.
Two major research projects are underway to see if the U.S. central bank should begin minting digital money, Al Jazeera reported.
The Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) is conducting a study with the Federal Reserve Bank of Boston on a digital money experiment dubbed Project Hamilton. A future “Fedcoin” would mix the features of Venmo and Apple Pay, according to the Boston Fed president.
There’s also the Digital Dollar Project, a project by the nonprofit Digital Dollar Foundation and consultancy Accenture Plc. to examine the practical steps toward a CBDC.
Advocates of a digital dollar argue that “a whole-of-government approach can push forward on a coordinated framework with multiple avenues,” Al Jazeera reported.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?