This week’s cryptocurrency news is focusing more on regulatory discussions than market turbulence. Indeed, it appears that policymakers want to restrain the development of blockchain technology. The Federal Reserve and the U.S. Securities and Exchange Commission (SEC) publications and opinions on cryptocurrency regulation are most notable at the moment. However, a different scenario is developing on Capitol Hill as a congressman promotes a digital dollar.

After May’s crash, discussions about cryptocurrency regulation are unlikely to disappear anytime soon. The market’s value dropped by almost $1 trillion in the first half of 2018 and is now only around $900 billion, a far cry from the $2.1 trillion all-time high. The widespread collapses, de-peggings of stablecoins, and scams in the cryptocurrency market are making people feel even worse.

It’s challenging to remain thrilled about the concept of a paperless, easily transactable currency when crypto is beset by so many issues. Jim Himes, a congressman from Connecticut, wants to remind his colleagues that all of these benefits still apply to a centrally controlled, publicly supported digital currency, but without the problems that plague the private sector.

Himes wrote a letter requesting his colleagues to start discussions about implementing a U.S. digital dollar. Himes presents many of the same justifications for and against central bank digital currencies (CBDC). This recent paper makes it obvious that Himes wants a CBDC to complement the USD rather than replace it.

The backing of the Federal Reserve for establishing a CBDC is one item that Himes’ proposal is heavily dependent on. The Fed would be in charge of its distribution, control, and reserve backing if the nation were to introduce a digital currency. While Himes brings up the subject in the Capitol, Fed Chair Jerome Powell is openly criticizing CBDCs.

Proceeding with Regulations

Powell says that a new SEC notice shows that the Fed will need to figure out what to do about digital currency. For context, the SEC just issued a staff accounting bulletin on cryptocurrencies. The bulletin recommends businesses hold cryptocurrency in trust for clients to include those assets on their balance sheet. This can be extremely difficult for businesses themselves given the constant volatility of the cryptocurrency market.

This bulletin is being considered by the Fed as it examines cryptocurrency rules. He noted that it is rare for custody assets to be taken into account on the balance sheet. Before cryptocurrency, a business was never required to disclose custodial assets in its accounts. Powell and the rest of the Fed were shocked by the action. He now claims that the revelation has caught the body off guard and forced it to reconsider how it approaches legislation.

Powell is also making other market-related remarks that crypto doubters could find surprising. Most importantly, he claims that the sharp decrease in cryptocurrency prices has no “macroeconomic repercussions.” Powell also urged Congress to strengthen the regulatory environment surrounding CBDCs and the industry as a whole.

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