Jerome Powell: Let’s talk about crypto space

Good news from Paris and the Bank of France. Invited to a round table with the provocative title “Opportunities and problems of tokenization of finance: what role is assigned to Central Banks?”, Jerome Powell gave a partially warm speech on DeFi and cryptocurrencies. Let’s start with the “hottest”.

“The DeFi ecosystem demonstrates structural issues that can be traced back to the transparency aspect. However, we note that traditional finance and banking are not closely related to decentralized finance if we look at financial stability. The crypto “winter” has not affected the banking system and financial stability too badly, and this is good. However, the situation shows that it is necessary to carry out careful and thoughtful work on regulation.”

Words that lend themselves to assumptions of various kinds. On one hand, it seems that Powell’s words do not take into account the “freezes” that have hit traditional finance. Rather, we can only talk about a possible fall in relation to Bitcoin and cryptocurrencies. Instead, there is an obvious call for serious regulation.

What does Powell want?

But let’s move on, because in the second part there is something that demonstrates openness, and this time it is quite obvious:

“Special attention should be paid to stablecoins: most of them are available on crypto exchanges and platforms. In any case, they are assets used to make transactions on DeFi platforms. Public interest in them is high, there is a lot of talk about them, even in the field of retail payments”.

In these and subsequent excerpts, the chairman of the Federal Reserve System aims to draw attention to stable coins and their use cases: topics that have already been discussed in the very recent past, and which from time to time return to the tables of those who have a great influence in this world.

“We should seriously set this as the main goal when we talk about regulation. What is the best way to use stable coins? Should they be used by everyone, even outside of DeFi platforms? What is the regulatory framework that can be effectively applied? We have specific agencies that are already working, headed by the Ministry of Finance. We call on Congress to pass the necessary resolution on this issue.”, — said the head of the Fed.

Jerome Powell’s speech at the Louvre carries echoes of recent discussions about CBDC and stablecoins, which already enlivened congressional hearings last summer. In these cases, the Fed sought to reassure the alarmed American political class of the stability of the global monetary system, and especially of the stability of the dollar as the dominant currency. Tokenization of money will not affect their hegemony.