Cryptocurrencies carry risks, say Fed and Senate. Photo: Kanchara, Unsplash.
The chairman of the Federal Reserve, the central bank of the United States (USA), has again defended the regulation of crypto assets. And that this should apply to all types of digital currencies, from “root” cryptos like bitcoin to stablecoins and central bank ones, CBDCs.
At an event by the Bank for International Settlements (BIS), the central bank of central banks, Powell indicated that cryptocurrencies should be under regulation in the same way as traditional finance. As always, he stated that regulation is necessary for issues such as financial stability, combating illicit activities and investor protection.
Also on Wednesday, the US Senate foreign affairs committee approved a bill for the government to study whether the adoption of bitcoin as a legal tender in El Salvador poses risks to the country and how to mitigate them. Now, the Senate must vote on the bill. El Salvador also has the dollar as its legal tender and one of the concerns that the bill raises is whether the Central American country will use the US currency less.
Nayib Bukele, president of El Salvador, who managed to pass a law in the country overnight making bitcoin legal tender, said that “Never in my wildest dreams would I have thought the US government would be afraid of what we are doing here”.
After 60 days from the approval of the call “Accountability for Cryptocurrency in El Salvador Act”the Secretary of State and those responsible for relevant departments and agencies in the country must submit a study on the matter to Congress.
According to the text of the bill, the report should address topics such as El Salvador’s regulatory framework for adopting bitcoin as a legal tender and whether they are in line with the US task force on cryptocurrency transactions. There is still concern about the impact on US remittances to El Salvador.
Other points refer, for example, to the cybersecurity risks associated with operations with virtual assets and the impact of El Salvador’s decision on the economy and public finances of the Central American country.
The US Executive is expected to have a plan to mitigate risks to the country’s financial system that the use of cryptocurrencies as legal currencies “in certain countries” can have on the US economy. This plan must be submitted within 90 days after the law takes effect.