Fed Chief: Cryptocurrencies Remain A ‘Speculative Asset,’ Much Like Gold

Federal Reserve Chairman Jerome Powell said Monday (March 22) that cryptocurrencies are “speculative” investments, and therefore not reliable. He added that the Fed is moving slowly on the matter of creating a digital dollar, despite the soaring price of bitcoin in recent months.

Speaking at a virtual panel discussion, he added that cryptocurrencies are “highly volatile and therefore not really useful stores of value — and they’re not backed by anything.” As reported by CNBC, Powell said, “It’s more a speculative asset that’s essentially a substitute for gold rather than for the dollar.”

The panel discussion on digital banking was hosted by the Bank for International Settlements.

Meanwhile, Coinbase said that bitcoin was trading near $57,000, as it has attracted big name investors and some acceptance in the financial industry.

For the past several years, the Fed has worked on its own payments system. CNBC said that the final product is likely to happen over the next two years.

Last month, U.S. Treasury Secretary Janet Yellen said that central banks should explore creating and issuing sovereign digital currencies. The opportunity is that such currencies — digital dollars among them — could create “faster, safer and cheaper payments,” she said at a virtual conference.

“There’s a lot of things to consider here,” Yellen said. “But it’s worth looking at.” Yellen said that among those “things to consider” is how regulators would “manage money laundering and illicit finance issues.”

The rise of cryptocurrencies demands advanced technologies to close the gap with financial criminals, said. Ed Wilson, a partner at Venable LLP, a firm that specializes in financial regulations.

Wilson told PYMNTS that solutions will involve using advanced technologies to help financial institutions (FIs) close the gap, with financial criminals out to exploit the digital movement of money.

“Banks put too much emphasis on reducing reputational risks [caused by] regulatory failure,” he said. “They could reduce that if they would instead change how they run their account opening and anti-money laundering procedures.”