The United States Federal Reserve Board on Stablecoins
The United States Federal Reserve Board sees payment stablecoins as a form of money, according to Chair Jerome Powell. This statement was made during questioning at the House of Representatives Financial Services Committee’s semi-annual hearing on Fed policy on June 21.
Powell’s response came after committee ranking member Maxine Waters inquired about his reaction to the proposed stablecoin bill. If passed, this bill, which originated with the Republicans, would be the first crypto legislation in the U.S.
Waters expressed her concerns about the bill, stating that it would result in “58 different licenses with federal regulatory approval over only two of the licenses.” She further explained that the remaining licenses would be issued by states, territories, and other jurisdictions, which she believed would take state preemption to a new level.
In response to Waters’ comments, Powell stated, “We do see payment stablecoins as a form of money, […] and we believe that it would be appropriate to have quite a robust federal role in what happens in stablecoin going forward.” He emphasized that allowing extensive private money creation at the state level would be a mistake.
Differing Views on Stablecoins
Powell’s stance on stablecoins contradicts that of Securities and Exchange Commission (SEC) Chair Gary Gensler. During a Senate Banking Committee hearing last year, Gensler expressed the opinion that stablecoins may require registration and regulation. He has consistently stated that all cryptocurrencies, except Bitcoin (BTC), are considered securities.
Similarly, Powell’s position does not align with Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam’s assertion that stablecoins will be categorized as commodities. While there is no readily available definition of money from the Federal Reserve, it is commonly regarded as a medium of exchange. In contrast, commodities are defined under U.S. law as “goods and articles […] and all services, rights, and interests […] in which contracts for future delivery are presently or in the future dealt in.” The definition of a security is much more complex.
Concerns About Government Licensing Authorities
On the same day, former CFTC Chair Chris Giancarlo voiced his opinion on the bill in an editorial in The Hill. Giancarlo highlighted the potential issue of licensing authorities having the discretion to pressure stablecoin protocols into denying services to lawful but politically disfavored businesses. He referred to this as a “glaring omission” that could enable a government policy similar to the Obama administration’s Operation Choke Point. Giancarlo proposed a solution:
“The simple fix to this problem is to provide that government licensing authorities have no discretion to pick and choose among otherwise lawful activities and condition licensure on the stablecoin’s denial of legal transactions.”
Giancarlo cautioned that without this fix, stablecoin transactions could be subject to the shifting political climate in Washington.
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