Federal Reserve Chair Jerome Powell said during a June 21 Congressional hearing that Federal Reserve officials consider stablecoins money and accordingly believe the Fed should have a central role in their regulation.
Powell's remarks came in response to a question from Rep. Maxine Waters, D-Calif., regarding a proposed stablecoin bill, according to a YouTube video of the hearing.
“We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank," Powell said at the hearing. "We believe that it would be appropriate to have quite a robust federal role in what happens in stablecoins going forward, and that leaving us with a weak role and allowing a lot of private money creation at the state level would be a mistake."
Waters, ranking member of the House Financial Services Committee, said during the hearing that the proposed bill would "create 58 different licenses" for stablecoins, but federal regulators would only have oversight over two of the licenses.
"The remaining 56 licenses can be issued by each state, territory and D.C. with little or no federal oversight, regulation and enforcement," Waters said at the hearing.
She additionally suggested states could "be part of this process," but that the Fed should have a strong role in the interest of consumer protection, according to the hearing video.
Powell's comments put him at odds with U.S. Securities and Exchange Commission Chair Gary Gensler and Commodity Futures Trading Commission Chair Rostin Behnam, Coin Telegraph reported. Gensler has asserted multiple times that all cryptocurrencies, with the exception of bitcoin, are securities, while Behnam has said stablecoins are commodities.
Republicans and Democrats are in the process of resolving their differences regarding what should be included in the stablecoin bill, such as whether the U.S. should explore a central bank digital currency and what kind of role the Fed should play, CoinDesk reported. The latest version of the draft bill would give states the authority to oversee stablecoin issuers, but the Fed would establish requirements for stablecoin issuers.
The Fed would also be able to take action against stablecoin issuers regulated by the states in the event of an emergency situation, according to CoinDesk.
A blog post from the Cato Institute said implementing stablecoin regulations is a necessary step to ensure the U.S. maintains its position as a global financial leader.
"If the U.S. wishes to remain the world’s preeminent financial market, legislative work on stablecoins must continue to ensure that our laws are open to technologies with the potential to help maintain and extend that lead," the post said.