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?? Fed chief warns of risks from Bitcoin
?? Powell: Bitcoin is not a substitute for the dollar, but rather for gold
?? Central bank digital money is being explored, but no rushWhile the love of investors for Bitcoin currently apparently knows no bounds and the cryptocurrency is rising to ever new heights, voices are once again being heard in US politics warning of the dangers of digital money. After recently US Treasury Secretary Janet Yellen Describing Bitcoin as a “highly speculative asset” and “extremely volatile”, Jerome Powell, her successor at the head of the US central bank, has now expressed skepticism about cyber money. For him, Bitcoin and Co. are purely speculative investments that have little in common with a real currency.
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Powell: That’s why Bitcoin and Co. are not suitable as a money substitute
At a virtual conference last Monday, which was organized by the Bank for International Settlements (BIS), Powell made it clear, according to the news channel “Al Jazeera”, that he would rather call cryptocurrencies “crypto-assets” because of their high volatility Undermine the ability to store value, which is one of the basic functions of a currency. “Crypto investments are highly volatile – see Bitcoin – and therefore not really useful as a store of value,” the Fed chief is quoted by MarketWatch as saying. Cryptos are therefore “more of a speculative asset that is basically a substitute for gold rather than the dollar,” Powell continued.
In fact, wild price fluctuations and a certain instability in Bitcoin cannot be denied. The largest crypto currency is currently in the range of 52,470 US dollars and has thus gained more than 80 percent in value since the beginning of the year, when a Bitcoin only cost around 29,000 US dollars. In the meantime, the digital currency even rose to an all-time high of more than 61,000 US dollars in mid-March – only to drop back to a good 53,000 US dollars a few days later.
Due to these violent price fluctuations, digital currencies such as Bitcoin are disqualified as an alternative to conventional money in Powell’s eyes. According to the Fed chief, this can also be seen in the fact that Bitcoin & Co. are not particularly used due to their volatility in the area of payments. “The public must take the risks [von Krypto-Assets] understand, “Powell warned,” The basic thing is that there is volatility. Then there are the excessive energy requirements in mining and the fact that they are not covered by anything, “said the head of the Federal Reserve.
Stablecoins only a little better for Powell
Stablecoins, whose value is linked to another asset such as a national currency or a currency basket, does not give Powell very good marks either. According to “Business Insider”, he described this at the BIS conference as an “improvement” compared to the other crypto currencies and said that it was in the digitalization of the dollar “could play a role”, but at the same time he was skeptical that they would form the basis for a global monetary system. “Stablecoins could play a role with proper regulation, but that role will not be to lay the foundation for a new global monetary system. They will not be a substitute for a solid monetary system based on central bank money,” Newsweek quotes Fed chairman.
The US Federal Reserve is in no hurry with its own digital currency
However, the Federal Reserve wants to take its time with creating its own digital currency. “Because we have the world’s leading reserve currency, we don’t have to rush this project,” said Powell. According to “CNBC”, however, the first investigations into the potential of digital central bank money are already underway. In August 2020, for example, the Boston Fed and MIT started a joint study that should lead to a better understanding of digital currencies. The study, which is expected to take two to three years, focuses on hypothetical facts instead of an actual implementation of crypto money by the central bank.
“You can expect from us that we proceed with great caution and transparency with regard to the development of a central bank-supported digital currency,” Powell said according to “CNBC”. He also pointed out that a digital central bank currency would ultimately need approval from Congress and the government as well as large parts of the public on its way – and this is still at the very beginning.
Finanzen.net editorial team
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volatile Fed Chairman Powell Bitcoin substitute dollar message