The new Chairman of the Federal reserve system of the United States stated its position regarding cryptocurrencies. In his opinion, cryptocurrencies have no intrinsic value, often used as a means of payment and are not a means of accumulation, but are great for money laundering. He also rejected the idea that crypto-currencies can pose significant risk to financial stability at their current size.
The Chairman of the US Federal reserve and Jerome Powell (Jerome Powell), who took office in February this year, answered questions about cryptocurrency in his speech on Wednesday in the Committee on financial services of the house of representatives.
This Committee has the authority in matters relating to the US economy, banking system, housing, insurance, securities, stock exchanges, monetary policy, international Finance, international monetary organizations and efforts to combat the financing of terrorism.
A member of the house of representatives and Vice-chair of Committee Patrick T. McHenry (Patrick T. Mchenry) asked Powell to explain his opinion about the cryptocurrency. The fed chief said that there are «significant risks to unsophisticated investors» who «see that the asset rises in price, and I think it’s great.» They think, «I’ll buy it», but this purchase does not carry any guarantees. He said:
«Cryptocurrency is ideal in order to hide their income or to launder them. In fact, they do not have any intrinsic value, so I think that there are problems related to the protection of consumers and investors.»
In response to the question of whether the fed is considering issuing its own digital currency, Powell said:
«We don’t even think about it. The fed does not consider this issue as something we must do.»
Powell also claims that the bitcoin is not a currency, explaining:
«If you think about what currency you will realize that they basically have to be a means of payment and a means of capital preservation. Crypto-currencies are not very often used for payment. Usually people sell their cryptocurrencies, and then pay in dollars. From the point of view of the means of preserving capital — a view on volatility. It is clear that they are not».
Asking questions Powell, McHenry spoke on the current regulatory framework for cryptocurrencies in the US. He explained that each of the 50 States has its own requirements for cryptocurrency companies operating at the local level, for example, obtaining a license for the provision of financial services.
In addition, there are regulators such as the Commission on commodity futures trading (CFTC) and the Commission on securities and exchange Commission (SEC) have certain powers in that part of the cryptocurrency industry, where it falls under their sphere of control. He said:
«There is a wider regulatory framework, but Federal authorities have yet to come to a common agreement about how to regulate the industry.»
The lack of financial stability risks
McHenry, asked Powell whether the fed sees the threat from the cryptocurrency in their ability «to influence monetary policy given current shape and scale of size of the market.» The fed Chairman said, «today – absolutely not.»
Powell also explained his previous statement about the impact of cryptocurrencies on the financial stability of the country, which he did in response to the question whether currently the cryptocurrency a serious threat to financial stability. He said:
«They are not large enough to do it now. That’s what I meant, not that cryptocurrencies will soon disappear.»
Powell believes that the recent reports of the BIS and other institutions to adequately outlined the risks associated with the cryptocurrency and encouraged the appropriate regulatory authorities to consider them. Powell also added that the Agency with the appropriate authority such as the CFTC and SEC, can pay attention to the protection of cryptocurrency investors.
«We have no power against cryptocurrency. We have the power in respect of banks,» he said.
This week the financial stability Board (FSB) also noted that «cryptocurrency assets in real time do not pose a significant risk to global financial stability».
In the past representatives of the FRB and the fed has repeatedly spoken about the cryptocurrency. In March, the President of the Atlanta fed urged to refrain from investing in cryptocurrency, and last fall the head of the Philadelphia fed, said that the bitcoin is unlikely to affect the monetary policy of the United States.
In December 2017, the previous fed Chairman called bitcoin a «speculative asset» and Powell stated that «today, crypto-currencies do not affect our work.» Moreover, the representatives of the fed with a positive look at the introduction of the blockchain: last fall, Vice President, Federal reserve Bank of Boston noted that the technology will move SWIFT and other intermediaries.