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(Kitco News) – The world’s major central banks, including the Federal Reserve, have said they are not threatened by the growing advancement of digital currencies and stablecoins.
Speaking at a panel discussion at the Bank for International Settlements (BIS) Innovation Summit on Monday, Federal Reserve Chairman Jerome Powell dismissed bitcoin’s role as a global currency, claiming it was too volatile for consumers.
Powell described bitcoin as a speculative asset that is not backed by anything.
“Crypto assets are very volatile and therefore are not useful as a store of value,” he said. “It is a speculative asset that is essentially a substitute for gold rather than the dollar.”
POWELL: #Crypto assets are highly volatile and are not useful as a store of value. They are not supported by anything. It is a speculative asset that essentially replaces #gold rather than for the #dollar. #FOOD
– Kitco NEWS (@KitcoNewsNOW) March 22, 2021
At the same time, Agustín Carstens, chief executive of the BIS, took a look at stablecoins, saying they also didn’t make much sense because their value comes from other volatile assets. He described stablecoins as having “inherent risks of destabilization.”
The latest comments on cryptocurrencies come as central banks say they are in no rush to develop a global central bank (CBDC) digital currency.
Powell said that with the US dollar being the world’s reserve currency, the Federal Reserve should be at the forefront of developing a central bank digital currency, but there’s no need to rush the process.
He added that the US central bank is currently studying and experimenting with the idea of a CBDC; However, he also said they were unsure whether there was enough public or government support for a digital currency.
Powell also described several risks the Federal Reserve should address when developing a central bank digital currency, including cybersecurity and financial stability.
“We don’t want to destabilize the two-tier system between the central bank and private banks and private banks and the public,” he said.
While the big central banks don’t feel threatened by the growing digital currency market, it seems they are being used more and more by consumers around the world.
According to a recent internal report from the world’s largest crypto-payment processor, CoinPayments, from the first quarter of 2019 to the fourth quarter of 2020, the North American cryptocurrency market saw a 300% increase in transactions as a result of more and more businesses and traders have embraced digital currencies.
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