Source: Blockchain Knight
Federal Reserve Chairman Jerome Powell reiterated the need to establish a regulatory framework for stablecoins and said the Fed has no intention of restricting the interaction between the banking industry and the Crypto industry.
On April 16, Powell said in a speech to the Economic Club of Chicago that both houses of the U.S. Congress are renewing their efforts to legislate for a stablecoin framework. He believes that given the growing importance of these digital instruments, the establishment of a regulatory framework is necessary.
Powell mentioned that previous efforts by the Federal Reserve to cooperate with Congress on a legal framework for stablecoins were unsuccessful. However, he noted that "the situation is changing" and that lawmakers are now showing new interest in formalizing regulatory provisions.
He stressed that such a framework should include consumer protections and ensure transparency, adding: "Stablecoins are digital products that may actually have quite broad appeal."
Relaxation of regulatory requirements
Powell also talked about the Fed's stance on Crypto-related banking activities. He acknowledged that U.S. banking regulators, including the Fed, have taken a conservative approach in issuing guidance on how banks should manage their exposure to digital assets.
However, he said that some of this guidance could be relaxed to accommodate responsible innovation as long as consumer protection and financial security can be guaranteed.
"We're going to try to do it in a way that maintains the safety and soundness of the financial system," he said.
The comments further elaborate on Powell's previous statement that the Fed has no intention of preventing banks from serving legitimate Crypto customers.
Earlier this year, Powell made it clear in his testimony to Congress that Crypto activities are already taking place within banks supervised by the Federal Reserve under the established regulatory framework.
He used Crypto custody as an example of how such services can be safely conducted if banks and regulators understand the scope of these activities.
Powell also acknowledged the complexity of regulating the integration of digital assets into traditional finance and called for a more comprehensive regulatory structure.
Crypto Assets and the Banking Industry
In a press conference after the February Federal Open Market Committee (FOMC) meeting, Powell said that while the threshold for banks to participate in Crypto business remains high, the Fed does not intend to cut off banking services for legally operating digital asset companies.
Discussions around stablecoin legislation continue, while the use of stablecoins in payments and digital settlements continues to grow. Last year, the amount of stablecoin transfers approached $14 trillion, surpassing Visa.
Powell's statement indicates that the Fed supports Congress' efforts to develop formal rules for stablecoins, provided that such legislation can strike a balance between innovation and risk control.
There is currently no federal regulatory system specifically for stablecoins, but several legislative proposals have been proposed in recent Congresses. The most notable of these are the GENIUS Act and the STABLE Act, proposed by the House of Representatives and Congress, respectively.
The Fed's latest stance shows that as stablecoins become increasingly integrated into global financial markets, U.S. financial authorities are increasingly willing to participate in the formulation of digital asset policies.
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