May 21, 2021

Jerome Powell, chief of the U.S. Federal Reserve, criticized cryptocurrencies on Thursday, explaining how they pose risks to financial stability and calling for more regulation of the popular digital currency.

The Treasure Department also flagged its concerns that wealthy individuals could use the largely unregulated digital currency to avoid tax, and called for large crypto-asset transfers to be reported to authorities.

Bitcoin had lost as much as 30% of its value this week after China announced new restrictions on the sector.

Powell called for a regulatory and supervisory framework amid the digital currency’s growing popularity.

This includes looking at innovators in private sector payments, which are not currently subject to the traditional regulation that applies to banks, investment firms, and other financial intermediaries.

The Fed will issue a discussion paper on digital payments this summer that will focus on the benefits and risks of adopting a digital central bank currency, and the public will be invited to comment.

In addition to reports of more than $10,000 worth of cryptocurrency transfers running parallel to bank reports of similar money transfers, the Treasury Department also proposed reporting transactions related to bank interest, dividend, and brokerage transactions to the IRS.

These proposed forms of regulation could allow the US government to gain insight into ransomware deposits, where hackers typically demand payments in cryptocurrencies to regain control of broken systems.

While research on a digital central bank currency in the U.S. remains tentative, China is moving at breakneck speed as it introduces a digital version of the Yuan and launches it for mass use during the 2022 Beijing Winter Olympics.

Apart from further research leading to its development, action by Congress would be needed before a digital currency could be developed in the US.

For more information, read the original story in Reuters.