At Times Bitcoin Felt Like A “Somewhat Frothy Market,” says Fed Chair Noting Stablecoins “Growing Really Fast”

While worried about that, the Fed is promising “powerful support” through monetary policy. Jerome Powell also called for “appropriate regulation” of stablecoins and getting the digital dollar right, rather than fast, because the US is “not in danger of losing” the reserve currency status.

On the second day of the testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve Chair Jerome Powell further elaborated on the state of financial markets and commented on the cryptocurrency market.

“Financial conditions are highly accommodative,” said Powell while noting that this is how people are getting things financed like SPACs.

“We see Bitcoin going up in value and down in value… At times it felt like a somewhat frothy market. You do worry about that,” he said, adding, but at the same time, “we're very focused on the real economy.”

Here, their focus is on maximum employment and price, and financial stability.

“We've got a long way to go. So we want to be careful about tending to our main mandate while we also think about financial stability issues.”

“Growing Incredibly Fast”

According to Powell, cryptocurrencies have surely tried but failed to become a viable payment method.

“With cryptocurrencies, it's not that they didn't aspire to be a payment mechanism, it's that they've completely failed to become one, except for people who desire anonymity, of course, for whatever reason,” he told Sen. Cynthia Lummis of Wyoming.

The question, he said, is really about stablecoins, which he compared to bank deposits or money-market funds, saying they're growing incredibly fast but without appropriate regulation.

“It's growing really fast – we really ought to have appropriate regulation. And today we don't.”

Following this, the US House of Representatives, the lower house of the U.S. Congress, has proposed a bill to change securities to define and include digital assets as “investment contract assets.”

Congressman Tom Emmer of Minnesota along with Reps. Darren Soto and Ro Khanna introduced the bipartisan bill, called the Securities Clarity Act.

Digital Dollar

Talking about a central bank digital currency (CBDC), Powell told the Senate Banking Committee on Thursday that he hasn’t made up his mind about a digital dollar yet.

“I am legitimately undecided on whether the benefits outweigh the costs or vice versa,” said Powell when asked to clarify his positions on a CBDC.

If the Fed were to issue its own digital fiat, “we would want very broad support in society and in Congress, and ideally, that would take the form of authorizing legislation as opposed to a very careful reading of ambiguous law,” he added.

Powell said the focus with a CBDC is to get it right because the US is the reserve currency with no “good competitor,” as such,

“We're not in danger of losing it. Certainly not to China which doesn't have an open capital account.”

Not concerned about competition, the real concern is about getting this right as a CBDC has its benefits and risks, he said.

“It's quite specific to the institutional context of each country. And I want to get it right. We are the reserve currency. We have a first mover advantage by virtue of that. So I think it's way more important to get it right than it is to do it fast.”

Stimulus to Continue

Besides crypto and stablecoins, and the digital dollar, Powell acknowledged that inflation had seen a “big uptick, bigger than many expected, bigger certainly than I expected,” but added that inflation may slow in “in six months or so,” as it is tied to the “shock going through the system associated with the reopening of the economy.”

Now, the Fed is trying to understand if this will pass fairly quickly or if they would need to act.

“One way or another, we're not going to be going into a period of high inflation for a long period of time, because of course, we have tools to address that.”

As for tapering, Powell told the Committee that there is still an “elevated level” of employment and the economy still has “a long way to go.” Also, the purchases have been contributing to the housing market's strength.

As such, the Fed “will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” he said.

Get Daily Headlines

Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

What to Know More?

Join Our Telegram Group to Receive Live Updates on The Latest Blockchain & Crypto News From Your Favorite Projects

Join Our Telegram

Stay Up to Date!

Join us on Twitter to Get The Latest Trading Signals, Blockchain News, and Daily Communication with Crypto Users!

Join Our Twitter

Add comment

E-mail is already registered on the site. Please use the Login form or enter another.

You entered an incorrect username or password

Sorry, you must be logged in to post a comment.
Bitcoin Exchange Guide