Powell: Regulate Crypto Before DeFi, Banking Meld
Federal Reserve Chairman Jerome Powell believes the crypto industry could cause wider financial turmoil in the future than it has so far, so better regulation is needed, Bloomberg wrote.
Global interest rate hikes have exposed structural flaws with DeFi, said Powell, who spoke on Tuesday (27 September) during a panel on digital finance.
“The good news, I guess, is that the interaction — from a financial stability standpoint — the interaction between the DeFi ecosystem and the traditional banking system and the traditional financial system is not that big at this point.”
He said there was a need for more appropriate regulation so that there will be rules in place as DeFi grows.
He said the Fed is still looking at the idea of a digital currency, and he doesn’t think it will make a decision “for a while.” Powell said they would need approval from both the executive branch and Congress to create a central bank digital currency (CBDC).
However, Powell has not yet endorsed a digital dollar.
Powell has recently said that stablecoin legislation should also be a priority at some point in the future.
Read more: Fed’s Powell on Stablecoins: Money is not ‘just another consumer product’
In an interview at the Cato Institute, he said that “we believe that something like that that purports to be money needs to be properly regulated.” But perception was a big part of the problem.
“For people to believe something is money, it has to actually have the properties of money,” Powell said. “If it doesn’t, then I don’t think you want to take money and turn it into another consumer product where sometimes it fails and sometimes it’s good.”
He said stablecoins would have to be “guaranteed to be good” and would need clarity and transparency.
But he added that there needed to be a balance to allow innovation, saying they “don’t want to be in that place” to stifle innovation.
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