Reading 3 min Published Updated
The U.S. Federal Reserve Board is considering a payment stablecoin as a form of money, Chairman Jerome Powell said during questioning at the House Financial Services Committee’s semi-annual hearing on Fed policy on June 21.
Powell’s comments came in response to senior committee member Maxine Waters, who asked him to respond to a proposed stablecoin bill that was drafted by Republicans and would be the first cryptocurrency law in the United States if passed.
Waters told Powell that the bill would create “58 different licenses with federal regulatory approval for only two of the licenses.” The rest of the licenses will be issued by states, territories and other jurisdictions, which “takes state preemption to a whole new level,” she said. Powell replied:
“We really see payment stablecoins as a form of money […] and we think it would be appropriate to have a fairly strong federal role in what happens to stablecoins in the future.”
“To allow the creation of a large amount of private money at the state level would be a mistake,” he added.
Commenting on the bill, Powell took a position that contradicts the position of the chairman of the Securities and Exchange Commission (SEC) Gary Gensler. Gensler said last year at a Senate Banking Committee hearing that stablecoins may require registration and regulation, and has repeatedly stated that all cryptocurrencies other than Bitcoin (BTC) are securities.
Related: Are stablecoins securities? Well, it’s not that simple, lawyers say
Powell’s stance is no better in line with Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam’s assertion that a stablecoin will be defined as a commodity. There is no readily available definition of Fed money, but it is generally considered a medium of exchange. Goods are defined under U.S. law as “goods and items […] and all services, rights and interests […]in which contracts for future supply are currently or in the future. The definition of a security is much more complicated.
— US House Committee on Financial Services (@FSCDems) June 21, 2023
Also on June 21, former CFTC chairman Chris Giancarlo spoke out about the bill in an editorial in The Hill. According to him, all licensing authorities will have “the right to force stablecoin protocols to deny service to legitimate but politically unfavorable enterprises at their discretion.” He called this a “flagrant omission” that could allow the government to implement a policy similar to the Obama administration’s “Choke Point” operation. Giancarlo said:
“A simple solution to this problem is to ensure that state licensing authorities do not have the right to choose between legal actions and condition licensing on the refusal of a stablecoin from legal transactions.”
Otherwise, “stablecoin transactions will be frighteningly affected by the changing political winds of Washington,” Giancarlo said.