Fed Chair Powell: 'Crypto is substitute for gold not U.S. dollar'
(Kitco News) - Leading global central banks, including the Federal Reserve, said that they are not threatened by the growing advancement of digital currencies and stable coins.
Monday, speaking in a panel discussion at the Bank for International Settlements (BIS) Innovation Summit, Federal Reserve Chair Jerome Powell dismissed bitcoin's role as a global currency, saying that it is too volatile for consumers.
Powell described bitcoin as a speculative asset that is not backed by anything.
"Crypto assets are highly volatile and therefore not useful as a store of value," he said. "It is a speculative asset that is essentially a substitute for gold rather than for the dollar."
POWELL: #Crypto assets are highly volatile and not useful as a store of value. They are not backed by anything. It is a speculative asset that is essentially a substitute for #gold rather than for the #dollar. #FED— Kitco NEWS (@KitcoNewsNOW) March 22, 2021
At the same time, Agustín Carstens, general manager of the BIS, took a swipe at stable coins, saying they also don't make a lot of sense because their value is derived from other volatile assets. He described stable coins as having "inherent destabilizing risks."
The latest comments on cryptocurrencies come as central banks say that they are in no hurry to develop a global central bank digital currency (CBDC).
Powell said that because the U.S. dollar is the world's reserve currency, the Federal Reserve should be on the cutting edge of developing a central bank digital currency, but there is no need to rush the process.
He added that the U.S. central bank is currently investigating and experimenting with the idea of a CBDC; however, he also said that they don't know if there is enough public or government support for a digital currency.
Powell also described several risks that the Federal Reserve would need to address as it develops a central bank digital currency, including cybersecurity and financial stability.
"We don't want to destabilize the two-tiered system between the central bank and private banks and private banks and the public," he said.
Although major central banks don't feel threatened by the growing digital currency market, there is some evidence that they are becoming more widely used among consumers worldwide.
According to a recent internal report from the world's largest crypto payment processor CoinPayments, from the first quarter of 2019 to the fourth quarter of 2020, the North American cryptocurrency market saw a 300% increase in transactions as more businesses and merchants embraced digital currencies.
"Powell's comments on cryptocurrency are outdated," says Jason Butcher, CEO of CoinPayments, world's largest crypto payment processor, in a statement to Kitco News. "Millions of people are using digital currencies as a form of payment to purchase essentials and this is only going to grow. Regulations are changing globally, supporting crypto as a form of payment, investment, and exchange of value."