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Relief: Federal Reserve Chairman Does Not Plan to Ban Cryptocurrency

Cryptocurrency fans and investors just breathed a major sigh of relief. Jerome Powell– Chairman of the Federal Reserve– has confirmed that he “has no intention” to ban cryptocurrency in the US.

Powell’s Position on Crypto

The chairman confirmed and clarified his position today while testifying in front of congress. House Representative Ted Budd asked Powell to explain one of his previous statements on the matter. 

Federal Reserve Chairman Jerome Powell takes his seat to testify before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress” on Capitol Hill in Washington, U.S., July 15, 2021. REUTERS/Kevin Lamarque/File Photo
Jerome Powell. Source: Reuters

In July, Powell joined a slew of other authorities suggesting that cryptocurrency should be eliminated at a congressional hearing. Speaking on the possibility of a CBDC, he said that one would erase the need for cryptocurrencies. Notably, he called this effect “one of the stronger arguments in its favor.” Therefore, he implied that this would be a good thing. 

However, when Bundy asked the chairman today if that was his intention, Powell admitted he “misspoke.” 

No… no intention to ban them. But stablecoins are like money market funds, like bank deposits. They’re to some extent outside the regulatory perimeter. It’s appropriate that they function under regulations. Same activities, same regulation.

Though not an expected outcome, some investors and thought-heads have feared a possible US ban on cryptocurrency. This would have been in line with China’s recent ban on all cryptocurrency transactions within the country. It also would have mirrored how the United States confiscated its citizen’s gold in 1933. 

Powell’s words today have eased their fears. Michael Saylor, who often refers to Bitcoin as “digital gold,” tweeted Powell’s response today and garnered over 20 thousand likes. 

What Powell Worries About

Powell does not appear to feel that the country is under threat enough by cryptocurrency to warrant a ban. He even went as far as to call Bitcoin a “failure” as a currency, citing volatile prices and lack of use cases. 

Instead, he says that his most significant issue is stablecoins, which see everyday use as a medium of exchange. For example, tether (USDT) is the largest stablecoin by market cap and visits more than double Bitcoin’s daily transaction volume. 

SEC chair Gary Gensler also shows skepticism of stablecoins. They are a common means of making transactions outside of the US regulatory framework. He even called them the “poker chips at the casino gaming tables” last week. 

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Gensler– like Powell– does not wish to ban cryptocurrency. However, he does believe that most on the market right now are securities, possibly including stablecoins.

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