Although Bitcoin (BTC) is too volatile to be money and “is not backed by anything”, it could be a “gold substitute”, said the president of the United States Federal Reserve.
Speaking at an event organized by the Bank for International Settlements, or BIS, on Monday, Jerome Powell made candid comments in response to a question about cryptocurrency.
Powell disagrees with Bitcoin support
When asked whether he thought Bitcoin and other cryptocurrencies posed a threat to financial stability, Powell launched familiar arguments that have long come from legacy financial data.
“Crypto assets – we call them ‘crypto assets’ – they are highly volatile – see Bitcoin – and therefore are not really useful as a store of value, and are not backed by anything,” he said.
“They are more of an asset for speculation, so they are not particularly in use as a means of payment. It is more of a speculative asset. It is essentially a substitute for gold instead of the dollar.”
Powell’s words provide some of the Fed’s most direct views on Bitcoin to go public recently and build a perspective offered in 2019. They also take place weeks after Treasury Secretary Janet Yellen made her doubts about decentralized cryptocurrencies clear.
As with Yellen, Powell seemed to trigger an explosion of negative market sentiment, with BTC / USD falling almost $ 1,000 after his response.
Despite all their differences, however, the biggest proponents of Powell and Bitcoin agree with the status of cryptocurrency as a new form of gold.
The verdict could hit gold bugs hostile to Bitcoin, especially Peter Schiff, who continues to claim that fate is on his side when it comes to generational value reserves.
Fiat has “public benefit in mind”
Along with the BIS general manager, Augustin Carstens, and Jens Weidmann, president of the Federal Bank of Germany, Powell also analyzed stable currencies with respect to the continued trend in central bank digital currencies, the CBDCs.
The conversation here was less unusual, with speakers repeating well-known stances involving the separation of private stablecoins and bank-operated CBDCs.
“To the extent that a stable currency is supported by sovereign currencies from leading countries, this is certainly an improvement over crypto assets, I would say,” continued Powell.
“But even so, where does credibility come from? It comes from that sovereign currency that is the barrier.”
Fiat coins, he said, are “issued for the benefit of the public”, while emphasizing that stablecoins will not serve as a basis for the global financial system in the future.