US Federal Reserve (Fed) Chairperson Jerome Powell has urged for better regulation of cryptocurrencies, claiming that the industry’s shakeout did not create broader financial turbulence.
Global interest rate rises highlighted “major structural flaws in the DeFi ecosystem,” Powell said on Tuesday at a panel discussion on digital finance organized by the Banque de France. “I believe the good news is that the relationship — from the viewpoint of financial stability — the interaction between the DeFi ecosystem and the traditional banking system and traditional financial system is not that substantial at this moment.”
“That situation will not persist indefinitely,” Powell said during a video conference. “There’s a real need for more appropriate regulation, so that as DeFi expands and starts to touch more retail customers and that sort of thing, so that appropriate regulation is in place.”
U.S. Central Bank Digital Currency
Powell also said that the Fed is still considering the concept of a digital currency and does not plan to make a decision for some time.
The Fed chairperson stated that the Federal Reserve will need approval from the executive branch and the American Congress – in order to further the project of an American Central Bank digital currency.
“So, we see this as a process of at least a couple of years,” Powell said. “Where we’re doing work and building public confidence in our analysis and in our ultimate conclusions, which as I say, we certainly haven’t reached yet.”
Powell has refrained from endorsing a digital dollar — despite the fact that the Fed issued a discussion paper on digital money in January. On September 8, Powell told the Cato Institute that the Fed was continuing to research the issue but would most likely not act without backing from the White House and Congress, “preferably in the form of a formal authorizing statute.”
Powell stated earlier this month that the Fed’s thinking was guided by four ideas: a digital dollar must protect privacy, go through financial system intermediaries such as banks, be widely transferable, and use identity verification to combat money laundering, similar to how bank accounts have verifiable owners.
