The current Chairman of the Federal Reserve, Jerome Powell, believes that the US central bank should drive innovation in digital financial products. However, he warned that some technologies, like cryptocurrency, may raise concerns that must be addressed before widespread use.
Powell said on Wednesday that it is “clear to identify the hazards” associated with digital assets that need new laws. The US has been hesitant in its approach to business, with President Biden’s issuing an executive order earlier this month that sparked some controversy.
As a result, the Fed’s Chair emphasised the need for new and better laws that reflect the nature of cryptocurrencies, which are a distinct asset class from stocks and bonds. Some items may pose a threat to financial stability. We don’t know how certain digital items would perform under market stress.
He also projected that such digital financial products, which are presently outside the regulatory perimeter, would be “brought under it” in the near future. Powell said this is a vital measure to “level the playing field, maintain user trust, safeguard customers, and everything else.”
It’s worth remembering that the Fed Chair informed the crypto sector last year that the US had no intention of following China’s lead and outright prohibiting digital asset transactions.
Powell also mentioned a central bank digital currency, adding that the United States is “just at the beginning of this journey.” When it comes to introducing a digital version of the dollar, he has said that it is preferable to be “right rather than first.”