The Federal Reserve and the Treasury Department turning up the heat on cryptocurrency, signaling a crackdown could be coming after several days of volatility in the sector.
Fed chair Jerome Powell said in a rare video message posted Thursday that cryptocurrencies, which have grown to have a market cap of nearly $2 trillion, pose some risks to both individual investors and the broader financial system.
He also distinguished between volatile cryptocurrencies and so-called stablecoins, which are tied to the value of other currencies such as the US Dollar.
“As stablecoin’s use increases, so must our attention to the appropriate regulatory and oversight framework,” Powell said, noting that businesses that process crypto payments could be a point of more regulation.
Powell also noted that the Fed is exploring how and whether cryptocurrencies could improve the current US financial system. He said the Fed has been exploring whether it should establish cryptocurrency of its own, called a central bank digital currency, or CBDC.
Cryptocurrencies have grown to have a market cap of nearly $2 trillion.Alamy Stock Photo
He said the Fed will publish a discussion paper this summer on the benefits and risks of establishing a CBDC, and will seek public comment.