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Favorite To Be Next Fed Chair Has 'Nothing Against' Bitcoin

Kitco News

Favorite To Be Next Fed Chair Has “Nothing Against” Bitcoin

(Kitco News) - Federal Reserve Governor Jerome Powell, currently the favorite to be the next Fed chair, is not against bitcoin per se but is wary of a central bank-issued digital currency.

Numerous media reports point to Powell as the likely nominee for the top central bank job, including the latest Wall Street Journal article, which cited a source familiar with the matter. Current Fed Chair Janet Yellen’s term will run out in February.

The announcement is expected to be made by the U.S. President Donald Trump on Thursday.

One of the most notable Powell’s quotes on bitcoin is from this summer. “[I have] nothing against bitcoin, nothing against, you know, private currencies,” he said at the Economic Club of New York in June. “[Digital currencies] are associated with money laundering and those sorts of issues, but we're not broadly opposed or supportive of alternative currencies.”

"I think from a Fed standpoint, I would say I am very cautious of the idea of a Fed digital currency," Powell added. “That’s something central banks are generally looking at, but I would say my approach to that would be very, very cautious.”

Concerns surrounding bitcoin, its legitimacy as well as its broader use have increased dramatically this year, as prices surged to new all-time highs and more firms began to accept the digital currency.

One of the biggest announcements this fall in regards to bitcoin came from the Chicago Mercantile Exchange, which said this week that it will be launching a bitcoin futures contract by the end of the year. 

“We’ve seen pent-up demand by clients. [Bitcoin] is a story that hasn’t gone away [and] CME Group is looking to bring new products,” the company’s CEO Terrence Duffy told Bloomberg when explaining the decision to introduce the new product. 

The news sent bitcoin to new highs, with the digital currency briefly trading at its new record high of $6,617.20 on Wednesday. 

Also, bitcoin’s massive price jump increased the aggregate value of all cryptocurrencies to a record high of around $184 billion on Wednesday, according to Coinmarketcap. 

Powell also touched on blockchain, the technology bitcoin is based on, at a Yale Law School event in March.

He described “meaningful technical challenges” and “privacy issues” when it came to financial institutions potentially using bitcoin in the future. He also noted that a central bank-issued digital currency “may stifle innovation over the long run.”

Blockchain technology is valued by many, even those who distrust bitcoin itself.

Some analysts predict that blockchain will outlive bitcoin, which is bound to crash. “My best guess is that in the long run, the technology will thrive, but that the price of bitcoin will collapse,” said Kenneth Rogoff, Harvard economist and former chief economist at the International Monetary Fund (IMF), in an article for The Guardian and Project Syndicate published in October. 

“The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates,” he said. “I have no idea where bitcoin's price will go over the next couple years, but there is no reason to expect virtual currency to avoid a similar fate.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.