Federal Reserve Chairman Jerome Powell has been explicit: they have no intention of banning cryptocurrencies, contrary to what has happened in China.
Powell responds categorically on cryptocurrencies
Yesterday, Powell took part in a hearing at the Treasury Department during which House Representative Ted Budd asked him some explicit questions about cryptocurrencies and inflation in the US.
— Documenting Bitcoin 📄 (@DocumentingBTC) September 30, 2021
Powell didn’t give a straight answer on inflation, but when it came to cryptocurrencies he was categorical.
Budd first posed a question to Powell asking,
“is it your intention to ban or limit the use of cryptocurrencies like we’re seeing in China?
The answer was a flat no.
Budd then reiterated the question, and the Fed governor’s answer was clear and unequivocal:
“No intention to ban them”.
Powell and stablecoins
Powell added that stablecoins should be placed in a regulatory context, which is more or less what Senator Lummis said a few days ago.
It is worth noting that stablecoins are not cryptocurrencies at all, but cryptocurrency tokens, often centralized, that replicate fiat currencies on crypto markets. True cryptocurrencies are only those that are decentralized and have no value other than what the market assigns to them.
However, it is not clear whether Powell was referring to all cryptocurrencies, or only to payment tokens such as Bitcoin and Ethereum. Some cryptocurrencies differ from others either because they have specific uses, or because they are so-called security tokens, which must be treated in a different way from a regulatory perspective, much more similar to how shares are treated for example.
It is likely that Powell was only referring to payment tokens such as BTC, ETH.
Elon Musk and the regulation of cryptocurrencies
A few days ago Elon Musk suggested that the government should do absolutely nothing to regulate them.
Should the U.S. government regulate cryptocurrency?
— Neil Jacobs (@NeilJacobs) September 29, 2021
With this statement, Musk represents the thoughts of many bitcoiners, but it is not certain that the financial authorities think the same way.
After Powell’s statement, the focus will no longer be on whether to allow cryptocurrencies to be used or to ban them, but on whether and how to regulate them. The crypto world is now so varied as to require different regulations depending on the type of cryptocurrency to be regulated.
During CNBC’s Delivering Alpha Conference, former federal prosecutor Katie Haun said that regulators need to take stock of the situation regarding the financial use of cryptocurrencies, because she argues that regulation cannot be one-size-fits-all.
It would be totally unfair and inappropriate to impose identical regulations on all cryptocurrencies. Stablecoins themselves are already treated differently from real cryptocurrencies.
Having left behind the question of a possible ban on cryptocurrencies in the US, we now need to start discussing seriously how to frame them within the Western democratic legal system.