In testimony in front of the House Financial Services Committee on Wednesday, Federal Reserve chair Jerome Powell said that the central bank should have a robust role in what happens to stablecoins going forward.

“We do see payment stablecoins as a form of money,” he said, adding that leaving the country’s central bank with a “weak role and allowing a lot of private money creation at the state level would be a mistake.” 

Powell also conceded that a potential Central Bank Digital Currency (CBDC) could threaten the financial privacy of U.S. citizens, and said that the central bank would not support individuals holding accounts at the Federal Reserve.

“If we were to, and we’re a long way from this, support at some point in the future a CBDC, it would be one that we’re intermediating through the banking system and not directly at the Fed,” he said.

Rep. Warren Davidson, one of the proponents of a bill to reform the U.S. Securities and Exchange Commission (SEC) and fire its chairman Gary Gensler, asked Powell whether he acknowledged that crypto had “staying power” as an asset class in the U.S. economy.

“It appears to have some staying power,” said Powell, while pointing out that the market cap of the digital asset industry had shrunk considerably since hitting $2.1 trillion in 2021. 

Davidson attributed much of the market’s volatility to the lack of legal clarity and said he hoped that the two bills on digital assets – one concerning stablecoin regulation and the other on market structure – would clear things out for Congress, regulators, and market participants.

The House Financial Services Committee will likely vote on the proposed legislation in the second week of July, according to statements made by Committee Chair Patrick McHenry before Wednesday’s hearing commenced.