Federal Reserve Chairman Jerome Powell has made it clear that the central bank doesn’t want to prevent crypto innovation but warned that the industry is still replete with fraud and risks, reports CryptoNews.

Powell has testified on Capitol Hill before the Senate Banking Committee, and when asked about the cryptocurrency space, he said that the US central bank had been “quite active” in that area while acknowledging that blockchain technology has some real-world use cases.

“We have to be open to the idea that – somewhere in there – there is technology that can be featured in productive innovation that makes people’s lives better,” he told members of the committee, adding:

“We don’t want regulation to stifle innovation in a way that just favours incumbents and that kind of thing. But, like everyone else, we’re watching what’s been happening in the crypto space and what we see is quite a lot of turmoil, we see fraud, we see a lack of transparency, we see run risk.”

He also once again warned that banks and other financial institutions need to be cautious in how they interact with crypto. “We see in crypto activity lots of things that suggest that regulated financial institutions should be quite cautious in doing things in the crypto space,” he said.

During the hearing, Powell added that he’d welcome Congress stepping in with a new legal framework for crypto. He said that although regulators were concerned about banks getting involved with stablecoins, such tokens could have a place in the financial system if they were properly regulated.

Following a string of high-profile failures in the digital asset space last year, including the collapse of FTX, once the third-largest cryptocurrency exchange in the world, American regulators have taken an increasingly aggressive posture on the crypto industry.

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June 2024