Fed Chair Jerome Powell calls stablecoins “a form of money”, and says CBDC is far from being a reality

With the Bitcoin price breaching the $30,000 mark, all eyes were on the crypto market on Wednesday. It seemed like the recovery investors had been waiting for had finally arrived. On the same day, US Federal Reserve (Fed) Chairman Jerome Powell presented his views regarding certain aspects of the crypto space, which left the community surprised.

Fed Chair Powell calls crypto an asset class

In his testimony to the House Financial Services Committee on Wednesday, Federal Reserve Chair Jerome Powell shed light on multiple topics pertaining to the crypto as well as TradFi markets. 

One statement that stood out was Powell calling stablecoins "a form of money". He also urged that there was a need for central bank oversight in order to create stablecoin regulation. Powell stated,

"We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank. We believe it would be appropriate to have quite a robust federal role."

The Fed Chair also talked about the potential of a Central Bank Digital Currency (CBDC) but provided a disappointing answer stating that the US was a long way from making this happen. 

On the prospect of a CBDC existing, Powell said that the central bank would not be managing retail accounts, i.e., accounts by an individual. Instead, these accounts would be managed through the country’s banks.

Powell further discussed the creation of legislation for cryptocurrencies and noted that two crypto bills are expected by July. Once the bills are through the debate and edit process, they would go forward for a Committee vote. This would bring regulation to the crypto market, which Powell stated had staying power as an asset class.

Jerome Powell also discussed the Traditional Finance (TradFi) market along with inflation. The Fed Chair stated that the central bank was still committed to bringing inflation down to 2%. 

Powell also addressed the potential for dedollarisation in the East, stating that preserving the status of the US Dollar as the world's reserve currency is very important to the central bank. However, no course of action to make that happen was discussed by Powell.