Bitcoin is lacking essential ingredients that would make it a useful currency. Because of this, this crypto currency is essentially more of a substitute for gold than the buck, Fed Chairman Jerome Powell said Monday.
‘Crypto assets are highly volatile – see Bitcoin – and aren’t really helpful as a store of value. They are not backed by anything. They’re more of an advantage for speculation,’ Powell stated, through a webinar sponsored by the Bank of International Settlements.
‘It is essentially a substitute for gold instead of the dollar,’ he added.
Stable coins are’an improvement’ over crypto assets, but their credibility comes from being endorsed by a sovereign currency, ” he explained.
‘Stable coins might have a part to perform with appropriate regulation, but that role won’t function to form the basis of a new global financial system,”’ he explained.
‘A worldwide money dominated by the incentives of a private business is something which will deserve and will receive the highest degree of regulatory expectations,’ the Fed chairman said.
1 day in the future, the Fed would develop an electronic dollar, Powell said, however, not until after lots of careful inspection and approval by the American people and authorities.
It would be easier for Congress to pass laws specifically authorizing the electronic money instead of for the Fed to use existing authority, ” he said.
Some economists argue that a digital dollar could have been helpful in the current attempts to invigorate the economy during the pandemic. Theoretically, electronic bucks could instantaneously be sent out to Americans.
Since he has in the past, Powell stressed the Fed is in’go-slow’ manner about such ground-breaking technology.
While work is going on exploring the ramifications of a digital dollar, Powell stressed that no decision is vain.
‘Because we are the world’s principle reserve currency, we don’t need to rush this job – we do not to be first to market,’ Powell said.
One concern Powell said is that Americans would love to hold digital dollars during any emergency, leading to potential bank runs from paper money.
‘There is only a huge level of thinking happening on how we could capture the potential benefits while also handling those possible dangers,’ Powell said.