Fed Chairman Jerome Powell told the House of Representatives today that stablecoins should face stricter regulations similar to money market funds or bank deposits.
Powell was asked specifically about Tether, currently the most valuable stablecoin, by Rep. Anthony Gonzalez (R-OH). Tether claimed each coin was backed by a dollar, but that has been proven false; rather it is backed mostly by commercial paper or debts. Powell said most of the time those assets are very liquid, but during the recent financial crisis that wasn’t the case. He explained:
“The market just disappears. And that’s when people will want their money. It’s very simple: these are economic activities very similar to bank deposits and money market funds, and they need to be regulated in comparable ways,”
Powell went on to say that if Stablecoins are going to be a part of the payment universe, then regulations need to be put in place, as a regulatory framework currently “doesn’t exist, really, for stablecoins.”