Why Yellen, Powell Cast a Wary Eye on Stablecoins

Why Yellen, Powell Cast a Wary Eye on Stablecoins

Bitcoin is exciting: its price swoops and dives. Such volatility has made regulators around the world look closely at Bitcoin and other cryptocurrencies with a value that bounces around. But two of the world’s most powerful financial regulators, U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell, are focused as well on a more boring but more useful form of crypto, stablecoins. They fear that their very usefulness could create risks for consumers and potentially even for the financial system; Yellen is pushing financial regulators to “act quickly” in drafting stablecoin rules. Others see stablecoins as the thing that will force central banks to dive into the digital coin business themselves.

1. What are stablecoins?

Digital assets sometimes referred to as coins, sometimes as tokens, that are designed to keep their value. That is, to experience only the kind of volatility seen in traditional currencies, which have price swings that are generally far smaller than those of Bitcoin. The most popular stablecoin, Tether, for instance, always trades for about $1.