18.10.2021

The head of the US Federal Reserve System has promised not to ban cryptocurrencies

The chairman of the Board of Governors of the US Federal Reserve System, Jerome Powell, made a speech before Congress the day before, in which he made an important remark on the crypto industry.

It turns out that America’s financial regulators “have no intention” to ban cryptocurrencies in the same way they did in China . Recall that in the spring of this year, the Chinese government banned Bitcoin mining , and a few months later introduced a complete restriction on any activity with digital assets.

The consequences of the cryptocurrency ban in China are already visible. In particular, on the eve of this, one of the largest mining pools in the world, called Sparkpool, was closed.

Closing the Sparkpool

Will cryptocurrencies be banned?

Powell explained the position of the US Federal Reserve in response to a question from Rep. Ted Budd, who inquired directly whether “regulators have the intention to restrict the use of crypto, as it is now being promoted in China . Here is a quote from Powell in which he shares his attitude to the situation. The cue is from Decrypt .

We have no intention of banning cryptocurrencies. But stablecoins are similar to money market funds, bank deposits, and to some extent they go beyond the regulation. They, however, must be subject to certain regulations.

Accordingly, Bitcoin, Ethereum, Solana and other popular decentralized projects should not have any problems. However, the issuing companies of USDT and USDC – the giants Tether and Circle, respectively – may still face difficulties in the future.

US Federal Reserve Chairman Jerome Powell

Powell’s main claim to stablecoins is the full provision of tokens with dollars. Earlier, he expressed concern that part of the reserves of Tether, which issues the USDT stablecoin , is not stored in the currency itself, but in debt obligations and other securities. Here is a quote.

They are usually quite liquid and are doing well. But during a crisis, the market may simply disappear, and at that moment people will want to withdraw their money.

He believes that regulation ensures that consumers can get their money back in the event of a crisis. Powell’s views on this issue echo a recent statement by Senator Cynthia Lummis, who supports the crypto industry. Here is her line.

It may be that stablecoins should only be issued by custodian institutions, money market funds or similar means. Stablecoins must be 100 percent backed by cash and cash equivalents, and this process must be constantly regulated.

This means that, taking into account the current remarks, it can be assumed that the regulation of stablecoins in the United States will become noticeably stricter. At a minimum, politicians still see dollar-pegged digital assets as a greater threat than full-fledged decentralized projects.

US Treasury Secretary Janet Yellen

Powell is working with US Treasury Secretary Janet Yellen on new stablecoin regulations due to be announced over the next few weeks, sources said. It is noteworthy that the innovations will not affect all other cryptocurrencies, which are volatile assets, that is, with more volatile rates.

Here is the full video of the officials’ meeting.

As you can see, in the United States, they decided to approach the regulation of the cryptosphere more liberally: some areas of the crypto market will be strictly regulated, but in general, the development of Bitcoin and altcoins is not going to put a spoke in the wheel.

Regulators are concerned about the transparency of crypto exchanges and the safety of customers, but solving these problems can contribute to the long-term development of the industry.

We believe that this approach of regulators will play into the hands of investors and the cryptocurrency industry as a whole. Still, stablecoins are attracting the attention of the authorities solely because of their connection with the dollar, which means that a possible failure of the stablecoins will badly affect the reputation of the world’s reserve currency. The main thing is that over time this does not develop into increased attention to full-fledged cryptocurrencies like Bitcoin.

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