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The U.S. government this week laid more groundwork for potential future cryptocurrency regulation.

Federal Reserve Chairman Jerome Powell spoke Wednesday, July 14 about the Fed’s interest in regulating stablecoins and the potential for a central bank digital currency (CBDC), while testifying before the U.S. House Committee on Financial Services.

Stablecoins (Tether and USD Coin, for example) are a category of cryptocurrencies that peg their value to an existing fiat currency, like the U.S. dollar. That helps stabilize their value, so they’re better suited for digital payments — unlike more volatile digital assets like Bitcoin. Ideally, these coins are underwritten by a reserve of the currency they’re tied to, but today there’s little official regulation enforcing that.  

Powell compared them to money market funds or bank deposits, which have a strong regulatory framework in the United States. “That doesn’t exist for stablecoins,” he said. “And if they’re going to be a significant part of the payments universe — which we don’t think crypto assets will be, but stablecoins might be —  then we need an appropriate regulatory framework, which frankly we don’t have.”  

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