(JustPatriots.com)- The U.S. Federal Reserve Chair Jerome Powell said on Wednesday that digital assets not governed by government regulation would probably be brought within a set of rules at some point.
“It’s highly likely that digital financial activities that are currently outside the regulatory perimeter will find their way, will be brought within it, which is necessary to level the playing field, keep the trust of users, protect consumers and all that,” Powell said during a panel discussion on digital currencies organized by the Bank for International Settlements.
He said cryptocurrencies and stablecoins present too much risk to the U.S. financial system and will require new rules to protect consumers.
(“I am from the government; I am here to help you.”)
Acknowledging that emerging technologies will likely make electronic payments cheaper and faster, they could also “destabilize existing financial institutions.”
Our existing regulatory frameworks were not built with a digital world in mind,” he continued.
Powell is warning that Stablecoins, central bank digital currencies, and digital financing will require changes to existing laws or new laws and frameworks.
What are Stablecoins?
Stablecoins are a type of cryptocurrency (a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority.) It’s usually tied to a commodity such as gold.
Central bank digital currencies are digital forms of currency. Governments issue them.
The U.S. Federal Reserve is researching digital currency, but there are no indications that they are ready to issue one.
They released a study on stablecoins in January, and in the report, Powell detailed several risks of digital finance. His concerns included worry for consumers as well as our entire financial system. He warned that the general public might not understand the extent of their potential losses. These investments lack the government safeguards that the traditional financial institutions provide, like insurance.
The Fed is also studying digital assets like Bitcoin to understand how they impact financial markets.
“We don’t know how some digital products will behave in times of market stress, which could lead to large destabilizing flows, nor do we know how stresses in crypto markets could potentially spill over into the traditional financial system,” Powell said.
Powell is alerting the consumer that crypto-assets may not be there when needed. A dollar invested may not have a dollar backing it up. But this is a problem in traditional markets as well.