WASHINGTON (AP) — Federal Reserve Chair Jerome Powell said new forms of digital money such as cryptocurrencies and stablecoins present risks to the U.S. financial system and will require new rules to protect consumers.
Powell, speaking Wednesday on a panel organized by the Bank for International Settlements, a global organization of central bankers, also said that new technologies will likely make electronic payments cheaper and faster. But they could also destabilize existing financial institutions, he said.
“Our existing regulatory frameworks were not built with a digital world in mind,” he said. “Stablecoins, central bank digital currencies, and digital finance more generally, will require changes to existing laws and regulation or even entirely new rules and frameworks.”
Stablecoins are a type of cryptocurrency usually tied to the dollar or a commodity such as gold. Central bank digital currencies are digital forms of dollars or other currencies, issued by governments. The Fed is researching digital dollars but has not yet made a decision on whether to issue one. It released a study on stablecoins in January.
In his remarks, Powell outlined several risks that stem from the growth of digital finance, including to consumers and the broader financial system.
Americans who buy stablecoins or crypto “may not fully understand the extent of their potential losses, or that these investments generally lack the government protections that accompany many of the traditional financial instruments and services that they’re used to,” Powell said.
The Fed is also trying to figure out how digital assets like Bitcoin might impact financial markets, particularly during downturns or market crashes.
“We don’t know how some digital…
Source : time
