US Federal Reserve Chairman Jerome Powell believes that Bitcoin, due to high volatility, will not replace the dollar, but can become a substitute for gold.
Jerome Powell said this in his speech at a conference organized by the Bank for International Settlements (BIS). He said that Bitcoin lacks many important elements that would make it a useful currency. First of all, bitcoin and other crypto assets are highly volatile and volatile, so it is risky to consider them as a store of value. In addition, transactions with cryptoassets are more like speculation, since “cryptocurrencies are not backed by anything.” According to Powell, cryptocurrencies are more likely to become a substitute for gold, but not for the US dollar.
At the same time, Powell called stablecoins “an improved version of cryptocurrencies”, since stable tokens are pegged to fiat currencies, which ensures their relative reliability. The Fed chairman acknowledged that stablecoins can play an important role in developing appropriate regulation. Yet they will not be able to lay a solid foundation for the creation of a new international monetary system.
Powell was more categorical about stablecoins a few years ago. He believed that with many payment options available, users would not be interested in using stablecoins and government digital currencies. Now Powell is beginning to gradually change his mind.
Speaking about the possibility of launching a digital dollar, Powell reiterated that the Fed can only implement this initiative after conducting thorough research. The US government should analyze the possible risks of the state digital currency, think over the options for its use, as well as assess its potential, what benefits such a digital asset can bring to the American society.
The Fed chairman invited Congress to think about laws regulating the use of the digital dollar. Thus, other government bodies, not just the FRS, will be involved in resolving this issue. Some economists believe that the launch of the digital dollar could have a positive impact on the country’s economy during a crisis and pandemic. In theory, Americans could instantly receive social benefits in digital dollars. However, Powell said that the final decision on the launch of the state stablecoin has not yet been made, as the Fed is in no hurry to introduce the latest technologies into the country’s financial sector.
“We do not need to be the first to launch the digital currency of the Central Bank. The US dollar is already considered the main reserve currency in the world, so we have nowhere to rush, ”Powell said.
He added that in such volatile times, American citizens will want to use digital dollars all the time. In the long term, this may lead to an outflow of ordinary money from commercial banks. At the same time, Powell said about the need to think about what potential benefits can be derived from the digital dollar, and how to protect against the associated risks.
Powell recently said that it is much more important at this stage to develop regulation for stablecoins, which should be controlled according to the same rules as traditional payment systems.
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