Federal Reserve Chair Jerome Powell has acknowledged stablecoins as a legitimate monetary instrument.

Appearing before the U.S. House Financial Services Committee's half-yearly monetary policy review on Wednesday, Powell discussed the digital asset sector. Watch below:

This was Powell’s first testimony before Congress since March.

Powell was summoned to shed light on the country’s interest rate trends and the Fed’s recent resolution to hold off on further hikes.

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Powell also emphasized that the Fed considers stablecoins to be a variant of currency. His remarks resonated with those he made last September during a conversation centered on digital asset regulations, where he termed stablecoins as "private money forms".

"The central bank is and will always be the main source of trust behind money," Powell stated at the time. "Stablecoins essentially borrow that trust from the underlying issuer, and in many cases, these are dollar stablecoins, so they’re really borrowing that trust."

Stablecoins are private monetary forms that could be prone to instability if not backed by high-quality assets, emphasizing the necessity of regulatory oversight in this domain, he explained.

Meanwhile, the Federal Reserve’s specific position on the role of stablecoins within the contemporary financial system and regulatory inclinations is yet to be explicitly articulated by the institution itself.

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