- Fed Chairman Jerome Powell argues that there may be stable controlled coins issued by private entities in cooperation with the American CBDC.
- He also told Congress that the Fed is almost complete with a report he said had previously been released in September last year on crypto and CBDCs.
American Fedcoin has been tackled as the biggest threat to Bitcoin and other cryptocurrencies in the US But according to the chairman of the Federal Reserve, you don’t have to pick one and you can do both. Jerome Powell further promised to publish a report that the Fed is working on on cryptocurrencies in the coming weeks.
Powell was speaking during a confirmation hearing before the Senate Banking Committee on Tuesday, Jan. 11. It addressed key economic and financial issues, such as the promised decline in the injection of feed capital into the market and the rise in interest rates. Crypto-currencies also emerged, and while the Fed is highly anti-crypto, Powell offered a glimmer of hope for the future of the sector in the United States.
Senator Pat Toomey asked Powell “If Congress authorized and the Fed goes in search of digital central bank dollars, is there anything that would prevent a well-controlled, privately issued stable from living with a digital central bank dollar? ”
«Not at all». Powell, who recently nominated President Joe Biden for a second term directing the Fed, told the Senate.
Powell also revealed that Fed is getting closer to releasing its report on digital currencies and CBDCs, which is still several months away. Already in July last year, the Fed said the report would be ready in September. However, it was brought forward again and, despite promises to be published before the end of the year, it was not.
Powell told the Senate:
We have not built it as far as we needed to build it. Powell commented on the delays in the report. But really it’s already there, it’s in a few weeks [que]we will post it.
Will Fedcoin Kill Stablecoins?
While Powell argued that Fedcoin would coincide with governing conventions, this relationship would be much more complicated than he figured out.
By nature, CBDC is a digital representation of fiat currency in a 1: 1 ratio. Fedcoin, therefore, would be a digital US dollar. There is no difference between Stablecoins, at least in theory. For example, Tether is a digital representation of the US dollar, backed by an equivalent dollar amount in the bank (or other readily convertible assets, as we have recently discovered).
The only difference between Fedcoin and Tether would be the issuers. And when you consider the trust issues plaguing Tether, it’s easy to see why Fedcoin could take a piece of Tether’s market share.
But that is not all. A November report from the Presidential Task Force on Financial Markets recommended that all stable coin issuers should be regulated like banks. That would subject Tether to the same regulations that banks like JPMorgan adhere to, and with Tether’s unstable corporate structure, this could be almost impossible.
It would be safe to assume that a current stable like Tether would take a big hit, some of which may even have to leave the US market. Banks like JPMorgan would also issue their own stable coins to fill the gap.
As the banks try to catch up with the market, Fedcoin would have all the time to establish itself in the market.