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Federal Reserve Chairman Jerome Powell is worried about crypto—again.
The U.S. central bank chief reportedly said today that new forms of digital money, such as cryptocurrencies and stablecoins, present risks to the U.S. financial system, according to an AP report.
Therefore, new rules to protect customers will be needed, he said on a panel organized by the Bank for International Settlements.
"Our existing regulatory frameworks were not built with a digital world in mind," he was quoted saying. “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,” he said.
"There are potential financial-stability concerns for some products," Powell said. "We don't know how some digital products will behave in times of market stress." The AP added that Powell said cryptocurrencies have been used for money laundering and other illicit activities, and that governments ought to work to prevent this so that products that do provide value to consumers can gain wider adoption.
Powell, who has been the Fed’s chair since 2018, has long been concerned about cryptocurrencies. Most recently, in January, he said managing the risks of stablecoins was "a very high priority" for the central bank.
Stablecoins are cryptocurrencies whose prices are more stable than well-known digital assets like Bitcoin and Ethereum. This is because they are pegged to fiat currencies like the U.S. dollar and the euro, and many of them claim to be backed by fiat reserves.
CBDCs are different: they are digital versions of fiat currencies but are regulated and centralized, with a country's central bank backing them. Governments around the world are in different stages of researching or implementing them. China is well ahead of the game and in January released its digital yuan wallet.
But the U.S. has been slow to move ahead with one and Powell reiterated today that the central bank was "only at the beginning of this journey" and still hadn’t made a decision on issuing one just yet.
Powell has been saying since last year that more research was needed on whether to give a CBDC to the American public.