Jerome Powell on Crypto
Chairman of the Federal Reserve, Jerome Powell, said on Monday that cryptocurrencies are an unreliable store of value and that the Federal Reserve has no plans to launch a rival digital currency.
During a virtual panel hosted by the Bank for International Settlements, Powell said, “They’re highly volatile and therefore not useful stores of value, and they’re not backed by anything. It’s more a speculative asset that’s essentially a substitute for gold rather than for the dollar.”
Though cryptocurrencies are unlikely to win the Fed’s approval, the central bank has considered developing its own digital currency. Last August, the Fed collaborated with researchers at MIT to develop and analyze a central bank digital currency. Powell emphasized how the pandemic revealed the importance of creating better payment systems so money can be quickly distributed to those in need, so it’s no surprise the Fed is considering its own digital currency.
Powell clarified that while the Fed is still looking at the possibility of a digital currency, thorough testing is needed before such a currency can be adopted. He said, “To move forward on this, we would need buy-in from Congress, from the administration, from broad elements of the public, and we haven’t really begun the job of that public engagement… Because we’re the world’s principal reserve currency, we don’t need to rush this project. We don’t need to be first to market.”
As cryptocurrencies continue to gain popularity, more countries are considering digital currencies. While a digital dollar likely won’t be coming any time soon, we may see some sort of digital currency backed by the Federal Reserve in the distant future.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
