Federal Reserve Chairman Jerome Powell holds a press conference following the two-day meeting of the Federal Reserve’s Federal Open Market Committee in Washington, July 31, 2019.
Sarah Silbiger | Reuters
Federal Reserve Chairman Jerome Powell said on Monday that cryptocurrencies remain an unstable store of value and the central bank is in no rush to introduce a competitor.
“They are highly volatile and therefore not really useful stores of value, and they are not supported by anything,” Powell said during a virtual panel discussion on digital banking hosted by the Bank for International Settlements. “It is more of a speculative asset that is essentially a substitute for gold than for the dollar.”
Powell spoke one day that bitcoin was down on Coinbase, but was still trading close to $ 57,000 each. The cryptocurrency has risen in price over the past seven months amid a wave of trading activity and growing adoption in the financial sector.
In recent years, the Fed has been working on its own payment system that will allow for faster money transfers, and the final product will likely be unveiled in the next two years.
In addition, the Federal Reserve has also conducted other investigations into whether a central bank digital currency would be necessary or practical.
On the latter issue, Powell said the Fed takes time to act.
“To make progress on this, we need buy-in from Congress, from the administration, from broad sections of the public, and we haven’t really started the task of that public engagement yet,” he said. “So you can expect us to act with great care and transparency in developing a central bank digital currency.”
The Boston Fed partnered with the Massachusetts Institute of Technology last year for 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 it will focus more on the hypotheses of a central bank sponsored cryptocurrency than on its imminent implementation.
Powell said Congress would likely need to pass some sort of enabling legislation before the Fed could move forward with its own currency.
However, he noted that the Covid-19 pandemic stressed the importance of developing better payment systems so that money can get to those in need quickly.
“It highlighted in a slew of things the disparate impact of so many things on poor and lower and moderate-income communities,” Powell said.