Fed's Powell urges broader regulation for stablecoins

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell said Tuesday that stablecoins will need greater regulation as they become more widely used by consumers.

Powell also said, in virtual remarks to a conference on digital finance in Paris, that the Fed hasn't yet decided on whether to proceed with a digital dollar.

The Fed's sharp interest rate increases this year, Powell said, have contributed to the collapse of some stablecoins and big drops in the value of cryptocurrencies, a phenomenon some traders have dubbed “crypto winter." Stablecoins are digital tokens pegged to the value of traditional financial instruments, often the dollar. In May, the stablecoin TerraUSD collapsed, wiping out $40 billion investor funds.

Powell said that higher interest rates have revealed the “significant structural issues” that exist in decentralized finance, a broad term that encompasses stablecoins, crypto currencies, and other new technologies.

Yet the crypto winter had little impact on traditional finance because for now there is not much overlap between the two, Powell said. But that may not continue.

“There's a real need for more appropriate regulation,” Powell said, as decentralized finance “starts to touch more and more retail customers.”

Earlier this month, in an interview at the Cato Institute, Powell said that anything purporting to be money should be tightly regulated.

“If people are going to think something is money, then it needs to actually have the qualities of money,” Powell said. “If it doesn’t, then I don’t think you want to take money and make it into just another consumer product where sometimes it fails and sometimes it’s good.”

Powell also sketched out a cautious path for the United States on the creation of a so-called central bank digital currency, or digital...