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Jerome Powell, the chair of the Federal Reserve, has expressed his strong support for quick regulation of stablecoins and asked Congress to enact legislation before the end of the year. His statements at a recent congressional session highlight how important it is to have regulations in place to guarantee the security and stability of stablecoin transactions in the US.
Federal Reserve's Commitment: Powell stressed that the Fed is willing to work with Congress to develop stablecoin rules. He emphasized the need for stablecoins to have a strong legal foundation and reaffirmed the Federal Reserve's commitment to seeing this through.
Act to Create Lummis-Gillibrand Payment Stablecoin: This bipartisan bill, put forth by Senators Cynthia Lummis and Kirsten Gillibrand, attempts to control payment stablecoins that are correlated with the US dollar. The goal of the law is to safeguard consumers and promote innovation without undermining the dollar's hegemony.
The law defines a "payment stablecoin" as any cryptocurrency asset intended to be used as a means of exchange or payment that may be redeemed for a specific quantity of US dollars or that maintains a steady value equal to the dollar. Stablecoins linked to non-US currencies or other assets are not covered by the measure.
In favor and against: Reactions to the proposed regulation have been conflicting. The measure has drawn praise and criticism from different quarters. Proponents of the bill include Coin Center, an advocacy group. They contend that the prohibition on algorithmic stablecoins would stifle creativity and give rise to issues pertaining to the First Amendment.
Next Actions: Several financial regulators and legislators will collaborate during the legislative process to establish a balanced regulatory framework that encourages innovation while maintaining financial stability.
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