Central banks all over the world started to pay more attention to cryptocurrencies. However, it is too early to say that many of them are ready to embrace cryptocurrencies. This week, Federal Reserve Chairman Powell said that cryptocurrencies remain an unstable storage of value. Moreover, the Federal Reserve is in no hurry to introduce a competitor.
According to Powell, they are highly volatile and therefore not really useful stores of value. Also, they are not backed by anything. Interestingly, Powell made this comment during a virtual panel discussion on digital banking hosted by the Bank for International Settlements.
Importantly, Powell also noted that a cryptocurrency is more a speculative asset, which’s essentially a substitute for gold rather than for the dollar.
It is worth noting that Jerome Powell spoke on a day when Bitcoin was down on Coinbase. However, it was still trading near $57,000 apiece. As a reminder, the cryptocurrency soared in price over the past seven months amid a flurry in trading activity. Moreover, growing acceptance in the financial industry also helped to boost its price.
Cryptocurrencies and Federal Reserve
People should keep in mind that, for the past several years, the Federal Reserve worked on its own payments system. The purpose of this system is to make it easier to transfer money. Interestingly, the Federal Reserve also conducted other probes into whether a central bank digital currency would be necessary or practical.
According to Jerome Powell, the Federal Reserve is taking time before moving into anything. This process will take a lot of time, as it not a small task to develop a central bank digital currency.
Last year, the Boston Fed made an important decision. The Boston Fed partnered with the Massachusetts Institute of Technology on a multi-year study into developing a central bank digital currency.
Interestingly, he also made an important comment. Powell noted that the pandemic emphasized the importance of developing better payment systems.
Cryptocurrencies have the potential to solve many issues. However, it won’t be easy to make cryptocurrencies part of everyday life without the support of authorities. Governmental organizations should join forces with companies, experts, and other interested parties to deal with all challenges. This way, it will be easier to address all more or less important issues. Moreover, there is no need to create additional challenges. People should keep in mind that cryptocurrencies have the potential to improve the situation.