While addressing the U.S. House Committee on Financial Services earlier today, Federal Reserve Chair Jerome Powell said that the existing unbacked digital currencies are “vehicles for speculation”:
The existing digital currencies…are really vehicles for speculation. They are not used in payments, they are not a store of value, they are speculation (like gold). That’s what they’re used for.
During the hearing, Powell stressed that the Fed had not made a decision on issuing its own central bank digital currency (CBDC). However, the central bank is determined to “get to the bottom” of that issue in order to get a grasp of both technical and policy issues, indicating that there’s no rush to issue a digital dollar:
Powell has made it clear that cryptocurrencies shouldn’t hamper the ability of law enforcement to track payments:
This will be something that we will invest a fair amount of time and expertise … to get it right.
This is not something we should tolerate.
The Fed head compared the growth of cryptocurrencies to other technologies, such as railroads, telephones, and the internet, stressing the importance of developing a regulatory framework that will prevent malicious use cases of the likes of terrorism financing.