Federal Reserve Chair Jerome Powell is currently at odds with SEC Chair Gary Gensler regarding the viability of using stablecoins as a form of payment, as well as on their current status as ‘securities’ according to the SEC.
Powell made his stance clear on the matter by stating that “We do see payments stablecoins as a form of money,” adding that “the ultimate source of credibility in money is the central bank.” Powell made a strong point that the U.S. central bank should play a “robust federal role” in overseeing stablecoins.
During the Capitol Hill hearing , Federal Reserve Chair Jerome Powell highlighted the importance of strong federal oversight on stablecoins, cryptocurrencies that peg their value to the value of the US Dollar.
The main conversation on the matter during the hearing occurred between Powell and United States Representative Maxine Waters.
Waters consistently highlighted challenges regarding federal oversight on the issuance of stablecoins, focusing on the potential challenge should stablecoin issuers register directly with their corresponding states, which is an option that is available in the draft legislation on stablecoins.
Powell fired back by saying that stablecoins, unlike other crypto options, have the potential to push forward digital payment options due to their connection to the nation’s sovereign currency.
The United States Securities and Exchange Commission, led by Chair Gary Gensler has had a very strict and clear stance on any crypto options beyond Bitcoin, Litecoin, Bitcoin Cash, and Ethereum.
The commission’s stance has been the subject of legal disputes in lawsuits filed against Binance, Coinbase, and Ripple.
Due to the SEC’s view on any altcoins being ‘securities’, these exchanges have been dealing with lawsuits against their current operations, which have caused a few of them to halt their current operations.
In 2022, Gensler mentioned that “I think the CFTC could have greater authority. They currently do not have direct regulatory authorities over the underlying non-security tokens.”
Gensler used the example of TerraUSD, an algorithm-based cryptocurrency that fell below its peg against the USD as an example of the dangers posed should stablecoins be used as a viable financial option.
Earlier this month, House Majority Whip Tom Emmer and Warren Davidson brought the SEC Stabilization Act to the floor.
The bill suggests the complete restructuring of the SEC, which includes the removal of Chair Gary Gensler from his current post.
“U.S. capital markets must be protected from a tyrannical Chairman, including the current one,” reported Rep. Warren Davidson, highlighting that the proposed bill is meant to “fix the ongoing abuse of power and ensure protection that is in the best interest of the market for years to come. It’s time for real reform and to fire Gary Gensler as Chair of the SEC.”
Gensler was also criticized by US Senator Bill Hagerty who tweeted that “The SEC is weaponizing their role to kill an industry. Allowing a company to list publicly and then stonewalling their attempts to register is indefensible.”
US Senator Cynthia Lummis also tweeted that “The SEC has failed to provide a path for digital asset exchanges to register, and even worse has failed to provide adequate legal guidance on what differentiates a security from a commodity”.