Jerome Powell Urges Regulation of Stablecoins, Considers Abolishing Digital Currency

On Tuesday, Federal Reserve Chairman Jerome Powell said the Fed supports establishing clear regulations for stablecoins to protect consumers in his testimony before the Senate Banking Committee. Powell said the central bank is providing 'technical thoughts' on this issue. This is happening despite former Treasury Secretary Janet Yellen's previous warnings, who emphasized the urgency of managing these digital assets. During the hearing, the main topic was debanking, where cryptocurrency companies struggle to access banking services. Senator Tim Scott (RS.C.) asked Powell if he is working with Congress to avoid excessive regulatory burden on cryptocurrency companies. Powell agreed, stating, "I think that a frank review of debanking is fair." Furthermore, he acknowledges that although the Fed does not intend to push cryptocurrency companies out of the banking sector, regulation can sometimes have unintended consequences. Powell continues to acknowledge concerns about this issue, saying, "I will tell you that myself and my colleagues are shocked by the increasing number of cases that seem to be non-bankable, and we are determined to review this issue." His comments are relevant to the ongoing congressional hearings investigating how U.S. banks treat cryptocurrency companies. Powell declared on monetary policy that the FED is not in a hurry to lower interest rates as inflation has exceeded the 2% target. "We know that reducing restraint policy too quickly or too much can hinder the inflation process," he added, warning that hastily lowering interest rates could destroy recent economic improvements. The US economy is projected to grow by 2.5% in 2024, with strong consumer spending and a recovering job market. The unemployment rate is 4% and the average monthly job growth has been 189,000 over the past four months. Although inflation has decreased significantly from its peak, core PCE inflation remains at 2.8% in December, higher than the Fed's 2% target. The Fed has kept interest rates at 5.25% to 5.5% since July 2023, after a sharp increase to combat inflation. Powell reiterated that future interest rate decisions will depend on economic data and evolving risks.