The Federal Open Market Committee, a committee within the Federal Reserve System, recently held a meeting from July 27th to 28th and discussed the risks posed by cryptocurrencies and stablecoins among other topics.
The officials mainly focused on the financial threats that stablecoins could have on an economy, as per the minutes of the meeting released. The officials remarked that these stablecoins seem to have “the same structural maturity and liquidity transformation vulnerabilities” as prime money funds have.
Participants of the meeting highlighted the importance of closely monitoring cryptos such as stablecoins and the need to develop an appropriate regulatory framework to address the risks they currently pose.
Fed Chair Jerome Powell also revealed his concerns over the stablecoins at the US Congressional hearing in July.
Many industrial enthusiasts believe that one of the reasons why the Fed disapprove of stablecoins is its loss of power over the dollar and financial market.
Professor Michael Bordo, an economist at Rutgers University, remarked that if the citizens start using private stablecoin rather than the central bank’s fiat currency, it would disallow the Fed to control the money supply or implement any monetary policy.
However, some Fed directors have a positive view of stablecoins. Director Christopher Waller said that coins backed by the US Dollar would magnify the effect of monetary policy on the US dollar rather than diminish it.