Federal Reserve Chairman Jerome Powell will hold a news conference following the Federal Reserve’s two-day meeting of the Federal Open Market Committee in Washington, July 31, 2019.
Sarah Silbiger | Reuters
Federal Reserve Chairman Jerome Powell said Monday that cryptocurrencies remain an volatile stockpile of value and that the central bank does not have to face a competitor.
“They are very volatile and therefore not really useful value stores and are not supported by anything,” Powell said during a virtual panel discussion on digital banking hosted by the Bank for International Settlements. “It is rather a speculative asset that is essentially a substitute for gold rather than for the dollar.”
Powell spoke at a time when bitcoin was down on Coinbase, but still traded close to $ 57,000 apiece. The crypto-currency has risen in price over the past seven months amid a boom in trading activity and growing acceptance in the financial industry.
The Fed has been working for the past few years on its own payment system that facilitates the faster transfer of money, with the unveiling of the final product likely to take place in the next two years.
Along with that, the Federal Reserve also undertook other investigations into the question of whether a digital coin from the central bank would be necessary or practical.
On the latter issue, Powell said the Fed is taking its time before stepping in.
“To continue this, we need a procurement from Congress, from the government, from broad elements of the public, and we have not really started the task of public engagement,” he said. “You can therefore expect us to move with great care and transparency with regard to the development of a digital currency of the central bank.”
The Boston Fed partnered with the Massachusetts Institute of Technology last year on a multi-year study on the development of a central bank’s digital currency. The work is expected to take two to three years and even then it is more focused on the hypothetical aspects of a central bank-sponsored cryptocurrency rather than on impending implementation.
Powell said Congress would likely have to pass some kind of legislation before the Fed can continue with its own currency.
However, he notes that the Covid-19 pandemic emphasizes the importance of developing better payment systems so that money can reach those in need quickly.
“Over a whole series of things, it highlighted the diverse impact of so many things on poor and low-income communities,” Powell said.