Fed Chair Powell: CBDC and Stablecoins Can Coexist

Markets rallied on the news but their overall future remains in limbo with inflation running hot and rate hikes on the horizon

article-image

Jerome Powell, chair, Federal Reserve, Blockworks Exclusive Art by Axel Rangel

share
  • Powell appeared before lawmakers Tuesday to explain the central bank’s reaction to rising inflation
  • The highly anticipated Fed report on cryptocurrencies will come in the next few weeks, Powell said

Federal Reserve Chairman Jerome Powell appeared before lawmakers Tuesday to defend his position as head of the central bank and answer questions about what is next for monetary policy as inflation rages on. 

Following a series of remarks about central bank digital currencies (CBDCs) and a Fed digital dollar, Powell announced during his confirmation hearing Tuesday that digital asset industry members and lawmakers can expect a report on digital currencies in the coming weeks. Powell first mentioned the report in July 2021 with an original release date set for September. 

Senate Banking Committee top Republican Sen. Pat Toomey questioned whether a Fed digital dollar would be able to exist alongside a “well-regulated, privately issued stablecoin.” Powell, who previously argued that a CBDC would render private stablecoins obsolete, assured Sen. Toomey that the two are not mutually exclusive. 

Inflation woes rage on 

On the eve of the release of the latest Consumer Price Index (CPI) report, Powell doubled down on his insistence that inflation is driven by prolonged supply chain pressures and a lagging labor market. 

“There is a mismatch between demand and supply, we have very strong demand in areas where supply is constrained, particularly around goods, particularly around things like cars,” Powell said. “We think part of [the solution] will be the return of a greater supply.” 

Central bank leaders had anticipated a faster return to the workforce and no one predicted that supply chain issues and bottlenecks would persist as long as they have, Powell said. 

Markets largely rallied on Powell’s comments with the tech-heavy Nasdaq Composite rising as much as 1.16%. Bitcoin and ethereum also rose from recent slumps, up 3% and 5%, respectively. But the current economic situation leaves the long-term outlook uncertain, analysts warn. 

“What we don’t know is how the economy will respond to simultaneously taking rates off the zero lower bound and the Fed draining liquidity from the financial system,” Nicholas Colas, co-founder of DataTrek research, wrote in a recent note. “Whatever happens — good or bad — will be a surprise to the market and, I would add, the Federal Reserve itself.” 

Powell did not mention a set timeline for rate hikes, but forecasts predict that increases will be coming soon. Goldman Sachs’ latest outlook anticipates four rate hikes this year and Oanda expects an 85% chance that the first increase will come in March. The future of risk assets, analysts say, depends on when and how much rates are raised. 

“Risk appetite returned on Wall Street after Powell signaled he expects the Fed to begin normalizing policy this year, but that a decision on balance sheet reduction could take up to four meetings,” Edward Moya, senior market analyst at Oanda, wrote in a recent note. “The path of inflation may drive quicker rate hikes and a sooner start to shrinking the balance sheet and that could be bearish short-term for risk assets such as cryptos, but equities will likely feel more pain.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (1).jpg

Research

As AI supercharges surveillance, privacy becomes a prerequisite and the winning stack will combine confidentiality with selective disclosure. Zcash’s Tachyon, composable standards on Ethereum/Solana, and compliance-aware pools aim to make private rails the new norm.

article-image

The derivatives giant will extend futures and options access to round-the-clock trading in early 2026

by Blockworks /
article-image

Global fiber network goes live as SEC clears 2Z token for utility use

by Blockworks /
article-image

The SPAC transaction positions Avalanche Treasury Co. as a Nasdaq-listed vehicle for institutional AVAX exposure by 2026

by Blockworks /
article-image

The collaboration brings regulated money market fund exposure to Polygon, with custody provided by Standard Chartered

by Blockworks /
article-image

FG Nexus teams with Securitize to bring its Nasdaq-listed equity onchain, offering tokenized stock trading through Ethereum

by Blockworks /
article-image

Sponsored

Taiko launches binding onchain governance and appoints three directors with expertise in global regulation, business strategy and blockchain tech

by Sponsored /