There is an increasing number of central banks warning about cryptocurrencies. US Federal Reserve Chairman Jerome Powell has said that new types of digital assets such as cryptocurrencies and stablecoins pose risks to the US financial system and new rules are needed to protect customers.
Associated Press’s report In a seminar organized by the Bank for International Settlements, Powell said that new technologies can reduce the cost of electronic payments and make it faster, but they also have the potential to destabilize financial institutions. “Our current regulatory framework was not designed with such digital assets in mind. We are working on new rules and frameworks, including changes in existing laws and regulations for stablecoins, central bank digital currencies and digital finance,” he said. also needs to be done.”
Stablecoins are a type of cryptocurrencies that are usually pegged to a commodity such as the dollar or gold. Central bank digital currencies are issued by the government and are a digital type of dollar or other currency. The Federal Reserve has been asked to explore the possibility of a digital dollar. However, it has not yet taken any decision regarding the digital dollar. Earlier this year the Federal Reserve released a study on stablecoins.
Powell did not specify what kind of regulations might be needed. He said that they will have to follow the principle of equal activity, equal regulation, which means that transactions outside the normal banking system should be regulated in the same way as transactions done through banks. Earlier this month, US President Joe Biden signed an executive order related to digital assets. In this, the Treasury Department and other agencies were asked to study the impact of cryptocurrencies on financial stability and security of the country. Cases of scams involving cryptocurrencies have also increased in the US in the past few months . For this reason, the regulators have called for increased scrutiny of the crypto segment.