Federal Reserve Chairman Powell Expresses Strong Support for Stablecoin Regulation

During a recent congressional hearing, Federal Reserve Chairman Jerome Powell expressed great interest in passing stablecoin legislation before the end of the year.

Federal Reserve Involvement in Stablecoin Regulation

Federal Reserve Chairman Jerome Powell recently endorsed stablecoin regulation. In response to a question from Wiley Nickel, Powell said the Federal Reserve remains open to working with Congress on stablecoin regulation.

“We were very happy to be a part of this process and appreciate our involvement. For us, having the right framework for stablecoins is key and we are fully committed to helping you achieve that goal,” Powell said.

This commitment underscores the need to create a legal framework for the provision of stablecoin services to increase the stability and security of transactions in the United States. This will be followed by a legislative process in which numerous financial regulators, as well as legislators, will play an active role.

Bilateral efforts towards a regulatory framework

The Lummis-Gillibrand Payment Stablecoin Act was introduced by Senators Cynthia Lummis and Kirsten Gillibrand in April as a comprehensive bill to regulate stablecoin payments. The idea of ​​this bipartisan bill is to regulate the market in a way that protects consumers and promotes innovation without threatening dollar supremacy.

The new regulations replace the Responsible Financial Innovation Act of 2022 (RFIA) and emphasize the regulation of stablecoins.

According to the new bill, a “payment stablecoin” is any crypto-asset that is intended to be used as a medium of exchange or a means of payment and is convertible to a fixed amount of U.S. dollars or has a stable value equal to the U.S. dollar. The bill does not cover stablecoins pegged to non-U.S. dollars or other forms of assets.

Response and support

The introduction of this bill has been met with both support and criticism from the financial and technology sectors. While some have praised it as a way to restore sanity to the industry and protect consumers, others have raised concerns about the potential negative impact on innovation.

In addition, the proposed stablecoin regulations have also raised questions about their impact on First Amendment rights. Coin Center, a cryptocurrency advocacy group, opposed the bill, saying the ban on algorithmic stablecoins is problematic.

Jerry Brito, CEO of Coin Center, praised the government for seeking to regulate stablecoins, but had some concerns about how the bill would impact innovation and free speech.

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