In Brief:
- Jerome Powell clarified that federal is not planning ban over digital assets
- Powell said that he was ‘misspoken’ and the ban was for Stablecoins, not Cryptocurrencies
- IRS is preparing the detailed document on crypto tax strategy
Federal Reserve Chairman Jerome Powell has made clear in his statement that the government wants to regulate cryptocurrencies, but they have no intention to ban Bitcoin and other digital assets as China did in the past.
Powell has responded to the question from Rep. Ted Budd (R-NC) during the hearing of the House Committee on Financial Services on the response of the Treasury Department and Federal Reserve to the COVID pandemic.
Budd asked the central bank’s top regulator, prefacing it by quoting Powell’s July comments that the creation of a digital dollar might make Stablecoins irrelevant. According to Powell, the Central Bank Digital Currency (CBDC) can conduct many functions like Stablecoins and Cryptocurrencies.
Budd asked the Central Bank’s top authority person “Is it your intention to ban or limit the use of cryptocurrencies, like we’re seeing in China?”. By recalling the July comments that their digital dollar creation might replace the Stablecoins.
On this question, Powell clearly said “No” and gave the explanation on their last comment which was “misspoken” by him. Powell clarified that the comment was in context for stablecoins, not for all cryptocurrencies.
He said that “No intention to ban them. But stablecoins are like money market funds, they’re like bank deposits, but they’re to some extent outside of the regulatory perimeter. And it’s appropriate that they be regulated. Same activity, same regulation.”
The concept behind the Stablecoins, such as Tether and USDC, is that they hold 1:1 value with a fiat currency. In the past, Powell also alleged that USDT is not backed fully by US dollars.
Rep. Warren Davidson, a member of the Congressional Blockchain Caucus, has asked what is the stand of the regulatory on crypto as there is no detailed documentation released by the regulators and asked Yellen to define tax strategy on cryptocurrency.
On this, Yellen commented that the IRS was in the process of issuing “detailed regulations that will answer that question.”
