Federal Reserve Chairman Jerome Powell holds a press conference following the two-day meeting of the Federal Reserve’s Federal Open Market Committee on July 31, 2019 in Washington.
Sarah Silbiger | Reuters
Federal Reserve Chairman Jerome Powell said Monday that cryptocurrencies remain an unstable store of value and the central bank is in no hurry to introduce a competitor.
“They are very volatile and therefore not really useful stores of value and are not supported by anything,” Powell said during a virtual panel discussion on digital banking hosted by the Bank for International Settlements. “It’s more of a speculative asset that essentially replaces gold, not the dollar.”
Powell spoke on a day when Bitcoin had dipped on Coinbase but was still trading near $ 57,000 apiece. The cryptocurrency has seen its price spike in the past seven months due to rapid trading activity and growing acceptance in the financial industry.
In recent years, the Fed has been working on its own payment system that allows for faster money transfer. The final product is expected to be revealed over the next two years.
Alongside this, the Federal Reserve has also conducted other research to determine whether a central bank digital coin would be necessary or practical.
On the latter, Powell said the Fed was taking its time before doing anything.
“To move this forward, we would have to let Congress, the administration and broad sections of the public buy us in, and we haven’t really started the task of that public engagement,” he said. “So you can expect us to be very careful and transparent about developing a central bank digital currency.”
The Boston Fed partnered with the Massachusetts Institute of Technology last year to conduct a multi-year study into the development of a central bank digital currency. The work is expected to take two to three years and, even then, will focus on the hypotheses of a central bank sponsored cryptocurrency rather than its upcoming implementation.
Powell said Congress will likely have to pass some sort of enabling bill before the Fed can proceed with its own currency.
However, he noted that the Covid-19 pandemic emphasized the importance of developing better payment systems so that money can get to those in need quickly.
“It has, in a whole range of things, highlighted the different effects of so many things on poor and low-income and low-income communities,” Powell said.