Your guide to Bitcoin, Ethereum and Web 3.0

US Congressman Stephen Lynch (D-MA) expressed concern on Wednesday about the possible impact of a digital central bank currency (CBDC), and asked Federal Reserve Chairman Jerome Powell to consider the potential for a tokenized version of the US dollar to wipe out others digital assets.

Lynch’s comments came as Powell testified before the House Financial Services Committee, asking a series of questions about digital assets.

“I’m concerned about a lot of these stablecoins and other cryptocurrencies,” Lynch said. “Do they go to zero when we come up with a CBDC that has the full faith and credit of the United States behind it?”

The Fed has been exploring the concept of issuing a digital dollar for years, publishing research as far back as 2016. CBDCs are similar to digital tokens used today as stablecoins—which track the price of a fiat currency—but are managed by their respective authorities instead of being issued by private firms on decentralized networks.

Powell indicated that it is unclear to him why any cryptocurrency that does not “draw on the credibility of the dollar” like Bitcoin or Ethereum has any value at all, regardless of a CBDC’s release. He declined to comment on how they could possibly be affected by a CBDC as a result.

“I’ve never understood the valuation of these,” Powell said of coins that “have no intrinsic value, yet still trade for a positive number.”

He also suggested that it is difficult to judge how stablecoins will be affected, citing a lack of regulation in the US that makes the reserves of some stablecoins opaque.

Stablecoins that Tether has encountered punishes previously for making false statements about their token’s support. And last month Paxos said it was preparing for a potential lawsuit from the Securities and Exchange Commission over its Binance-branded stablecoin BUSD.

Legislation that would provide a regulatory framework for stablecoins has been introduced on Capitol Hill several times, but each bill so far has failed to gain momentum. Last summer’s collapse of Terra’s UST, a so-called algorithmic stablecoin that maintained its value via code rather than being backed by assets, created renewed pressure from lawmakers to establish driving rules.

Eleven countries have already launched a CBDC and nearly 90 countries are piloting, developing or researching a CBDC, according to the Atlantic Council CBDC tracker. Lynch asked Powell for an update on the Fed’s timeline to potentially issue one as well.

“I can’t give you a date,” Powell replied. “We continuously engage with the public. We also research politics and also technology.”

Powell said the Fed has not yet decided whether a CBDC is an innovation even needed in the United States, adding that the central bank is not at the “stage of making any real decisions.”

He described the development of a CBDC as being in an early, experimental phase, adding that the technology will take years to evaluate. However, Powell indicated that a CBDC could be rolled out to the public quickly if decided by Congress, saying “I think we can get this in the hands of the public very quickly.”

New York’s Federal Reserve bank has previously engaged in one experiment which simulated how a tokenized dollar could work among financial institutions, launching a pilot program last November that included firms such as BNY Mellon and Citi.

Other lawmakers, including French Hill (R-AR), asked Powell questions related to CBDCs, such as whether the Fed chairman still believes a CBDC would need authorization from Congress.

Powell responded that the US Federal Reserve may not need written approval from Congress to establish a CBDC, at least for financial institutions, and explained that a “wholesale” CBDC could be valid for settling transfers between banks and other financial institutions.

Powell had previously said that establishing a tokenized version of the US dollar would need written approval from Congress, but he clarified in testimony before the House Financial Services Committee that the need is for a CBDC for “retail users.”

“We always talked about [a] retail CBDC, and that’s something we absolutely need congressional approval for,” Powell said. “There are potential forms of a wholesale CBDC that we need to look at. It’s less clear.”

Powell added that it’s also a valid question to ask why a wholesale CBDC would be necessary, citing the upcoming launch of FedNow, an instant payment service for Federal Reserve Banks set to launch later this year.

Some Republican lawmakers like Tom Emmer have pushed for legislation that would ban the Fed from releasing a CBDC, saying it would erode Americans’ right to financial privacy. He reintroduced the legislation shortly after the Federal Reserve Bank of San Francisco began to accept job applications for CBDC developers and designers.