Fed Chairman Powell: Consider addressing regulatory gaps around digital assets

Foreign media sources pointed out that Federal Reserve Chairman Jerome Powell said on Wednesday that digital innovation in the financial sector will continue, and at the same time, new regulations need to be developed.

“New technologies like distributed ledgers and decentralized finance have the potential to improve payment systems efficiency and encourage a more competitive financial landscape.”

Powell said the Fed has yet to make a decision on whether to adopt a CBDC, although it is working with other central banks on CBDCs to resolve frictions in international payments and to agree on some principles. Central banks will need to coordinate technically to ensure the proper transfer of monetary policy and payments within the global financial system.

In addition, the Fed chair said the Fed may collaborate with other central banks on cryptocurrencies and other areas of financial innovation, including stablecoins. He pointed out that financial regulation for cryptocurrencies and CBDCs is not yet established, and new changes, or even new rules, are needed. Powell added that the Federal Reserve is considering addressing regulatory gaps for digital assets and how they will work in the banking system.

Powell said: “There are also potential financial stability issues with some products. In particular, we don’t know how some digital products will behave under market stress, which could lead to huge volatile flows, and we don’t know about crypto market stress. How that might spill over into the traditional financial system.”

Powell’s comments come after the central bank released a white paper earlier this year on the pros and cons of CBDCs, and U.S. President Joe Biden signed an executive order earlier this month requiring institutions to study CBDCs and digital assets. As part of the Executive Order, the U.S. Secretary of the Treasury, along with the Secretary of State, Attorney General, Secretary of Commerce, Secretary of Homeland Security, Director of the Office of Management and the heads of the Budget, Director of National Intelligence, and other relevant agencies, shall submit to the President a document on monetary and payment systems Future reports include the conditions that drive widespread adoption of digital assets; the extent to which technological innovation affects these outcomes; and the implications for the U.S. financial system, the modernization and transformation of the payments system, economic growth, financial inclusion, and national security.

In addition, Powell on Wednesday emphasized that CBDCs need to ensure the privacy of users and prevent money laundering and other illegal activities. CBDCs need to integrate with the private sector and leverage the private sector’s innovative capabilities. He also believes that a CBDC needs to be a widely accessible payment method for all transactions that can be transferred seamlessly.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/fed-chairman-powell-consider-addressing-regulatory-gaps-around-digital-assets/
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