Powell began his opening keynote by touching on crypto-related matters. In general he emphasized that it is important to ensure that proper regulations are in place as the use of cryptocurrencies increases in the retail financial system.
He added that the normalization of monetary policy has exposed important structural issues in the DeFi system. Where, there is a lack of transparency in the DeFi system. Waima, however, is a positive from a financial stability point of view, when the decline in crypto does not have a wider impact on financial stability.
As a precautionary measure, Powell stated that "We need to be careful about how activities are carried out in the financial perimeter".
It was also touched upon that the European Central Bank will decide whether they will create a central bank digital currency within this year. ECB President Christine Lagarde warned that the central bank must be careful that the digital euro does not crowd out commercial bank deposits. Commercial banks and other private parties should also play an important role to ensure that everything runs smoothly.
European CBDCs are currently moving into the prototype phase. So it is not surprising that in Powell's speech earlier he also told that the fruition of the financial structure can bring new risks. An example of a new structure is an unhosted crypto wallet. "There is a lot of work and a lot of thinking that needs to be done to determine what is acceptable or not." Powell said.
Speaking about stablecoins, he stated that they are "a private form of money, it will be subject if the reserve is not a high quality asset." The Fed does not expect to make a decision on CBDC in the near future and if the Fed is to create a CBDC then it needs congressional support. This will take years.
