Central banks, including the Federal Reserve, have said they are not afraid of the increasing market of digital currencies.
Monday, speaking to a panel at the Bank for International Settlements, Fed Chairman Jerome Powell dismissed bitcoin’s alleged status as a global currency, saying it has too much volatile.
Powell said bitcoin was a speculative and un-backed asset.
“Crypto is very volatile and is not useful as a store of value,” he stated. “They are speculative assets that are essentially a substitute for gold instead of 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
Agustín Carstens of the BIS swiped at stable coins, claiming they also don’t make much sense because their value comes from other volatile assets. He said stable coins have “inherent destabilizing risks.”
The latest remarks on cryptocurrencies come as global central banks claim they are in no rush to create a global central bank digital currency (CBDC).
Powell said the Federal Reserve should be the leader in making a central bank digital currency, since the U.S. dollar is the reserve currency.
He went on to say that the Fed is currently investigating the idea of a CBDC, but also said it is unclear if there is enough government and public support for such a digital currency.
Powell also discussed the risks that the Fed would need to solve as it creates a central bank digital currency, including stability and cybersecurity.
“We don’t wish to destabilize the current two-tiered system between the Fed and banks and banks and their customers,” he explained.
Although central banks report not feeling threatened by digital currencies, there is evidence that these currencies are becoming widely used among people worldwide.
According to a report from the largest crypto processor CoinPayments, from Q1 of 2019 to Q4 quarter of 2020, the North American market increased by 300% as more businesses started to accept digital currencies.
“Powell’s remarks on cryptocurrency are outdated,” says the CEO of CoinPayments, Jason Butcher. “Millions of customers are using digital currencies to buy everyday items and this will only continue to grow. Regulations are being changed globally, supporting crypto as payment and investment.”