U.S. Has 'No Intention' to Ban Cryptocurrencies
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U.S. Has 'No Intention' to Ban Cryptocurrencies

2 years ago

Federal Reserve Chairman Jerome Powell says America doesn't want to follow in China's footsteps — but there's a catch.

U.S. Has 'No Intention' to Ban Cryptocurrencies

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The U.S. has no plans to ban cryptocurrencies, the chairman of the Federal Reserve has said.

Jerome Powell was facing questions from the House Financial Services Committee, and was asked whether America hopes to follow in China's footsteps by attempting to outlaw Bitcoin.

Back in July, Powell had said that the creation of a digital dollar would mean "you wouldn't need stablecoins, you wouldn't need cryptocurrencies."

When asked about those remarks, the central banker said he had misspoke — and stressed that the U.S. has "no intention" to ban cryptocurrencies. The Fed chairman added:

"Take the word ‘cryptocurrency’ out of that sentence and I’d say, it’s fairly widely understood the central bank digital currency could perform some of the functions [of stablecoins]."

On September 24, China’s central bank banned trading in cryptocurrencies — leading to an exodus of cryptocurrency exchanges, mining pools, and other cryptocurrency-related businesses. 

That came as its digital yuan project moves closer and closer to launch, and the CBDC is set to be fully rolled out in time for the Winter Olympics in Beijing next February.

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Regulation on the Other Hand…

Although Bitcoiners may be breathing a sigh of relief over Powell's comments, he did leave the door open for tighter oversight over stablecoins, comparing them to bank deposits and money market funds. He noted: 

"They’re somewhat outside the regulatory perimeter, and it’s appropriate they be regulated — same activity, same regulation."

Stablecoins are cryptocurrencies designed to maintain a one-to-one peg with a fiat currency, most commonly the U.S. dollar. Most do this by keeping a reserve of dollars and other highly liquid assets equal to the outstanding value of the stablecoins issued.

They have come under a good deal of regulatory scrutiny in recent months.

The largest stablecoin issuer Tether recently revealed — after years of ducking the issue — that its USDT stablecoins were backed not by a pool of dollars as it had claimed.

Instead, it's backed by a grab-bag of cash and "cash equivalents" like Treasury bills and corporate commercial paper — as well as almost 25% in less secure assets like secured loans, corporate bonds and precious metals.

There is currently $68.5 billion in USDT in circulation.

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