Federal Reserve Chairman Jerome Powell gives a press conference after the Federal Reserve’s two-day Federal Open Market Committee meeting in Washington, July 31, 2019.
Sarah Silbiger | Reuters
Federal Reserve Chairman Jerome Powell said on Monday that cryptocurrencies remain an unstable reserve and that the central bank is in no hurry to introduce a competitor.
“They are highly volatile and therefore are not really useful value deposits and are not supported by anything,” said Powell during a virtual panel discussion on digital banking hosted by Bank for International Settlements. “It is more of a speculative asset that is essentially a substitute for gold than for the dollar.”
Powell spoke on a day when bitcoin was down at Coinbase, but still traded close to $ 57,000 each. The price of cryptocurrency has skyrocketed in the past seven months amid a flurry of commercial activity and growing acceptance in the financial sector.
For the past few years, the Fed has been working on its own payment system that facilitates faster money transfers, with the release of the final product likely to take place in the next two years.
Along with that, the Federal Reserve also undertook further investigations as to whether a central bank digital currency would be necessary or practical.
On the latter issue, Powell said the Fed is taking too long before doing anything.
“To move forward with this, we would need the support of Congress, the government, broad elements of the public, and we have not yet started work on this public engagement,” he said. “So you can expect us to act very carefully and transparently when it comes to developing a digital currency for the central bank.”
The Boston Fed last year partnered with the Massachusetts Institute of Technology in a multi-year study on the development of a digital currency for the central bank. The work is expected to take two to three years and, even so, is more focused on the hypothesis of a central bank-sponsored cryptocurrency than on the impending implementation.
Powell said that Congress would probably have to pass some kind of enabling legislation before the Fed could proceed with its own currency.
He noted, however, that the Covid-19 pandemic emphasized the importance of developing better payment systems so that money reaches people in need quickly.
“He highlighted on a wide range of things the disparate impact of so many things on poor and low and moderate income communities,” said Powell.