Powell: Digital currencies will require new regulations

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell said new forms of digital money such as cryptocurrencies and stablecoins present risks to the U.S. financial system and will require new rules to protect consumers.

Powell, speaking Wednesday on a panel organized by the Bank for International Settlements, a global organization of central bankers, also said that new technologies will likely make electronic payments cheaper and faster. But they could also destabilize existing financial institutions, he said.

“Our existing regulatory frameworks were not built with a digital world in mind,” he said. “Stablecoins, central bank digital currencies, and digital finance more generally, will require changes to existing laws and regulation or even entirely new rules and frameworks.”

Stablecoins are a type of cryptocurrency usually tied to the dollar or a commodity such as gold. Central bank digital currencies are digital forms of dollars or other currencies, issued by governments. The Fed is researching digital dollars but has not yet made a decision on whether to issue one. It released a study on stablecoins in January.

Powell did not provide any details of what kind of regulations might be needed. He did say that they ought to follow the principle of “same activity, same regulation,” meaning that transactions outside the traditional banking system should be regulated the same as they are when executed by banks.

Earlier this month, President Joe Biden signed an executive order directing the Treasury Department and other federal agencies to study the impact of cryptocurrency on financial stability and national security.

His order came as several Democratic senators, including Elizabeth Warren from Massachusetts, have raised concerns that crypto could be used to evade U.S. sanctions on Russia.

In his...