Addressing a forum sponsored by the Swiss Institute of International Studies, in Zurich, Switzerland, on Sept. 6, the Federal Reserve Chair Jerome Powell answered questions about the issue of cryptocurrencies. He stated that the central bank is not “actively considering” minting cryptocurrencies of their own. He also added that cryptocurrencies have a range of issues including cybersecurity which makes them very unsuitable as a primary payment option.
“if you think about one currency that was for the United States it would really need to be cyber secure. It’s one thing to be able to counterfeit paper currency, it’s another thing to hack into a cyber currency, and create with a computer, however much of it you want. So, cyber issues are quite daunting. I don’t want to sound like I’m ruling it out but there’s another question too. If people are leaving their money in cyber currency and holding it there, they’re not putting it in a bank. What happens with banks is that people deposit their money and banks lend the money out. So, what happens to the intermediation process if everyone is just investing in this cyber currency? So, I would say we are in favor of financial innovation. We’re following these things carefully [..]”
The Reserve Chair, when questioned about the opportunities presented by digital currencies which the central bank was missing, he brought up the issue regarding the lack of demand for digital currencies, asserting that “consumers have plenty of payment options” and “they are not clamoring for this.”
Powell also commented on Facebook’s forthcoming stablecoin, Libra while addressing the house during “The Economic Outlook and Monetary Policy” panel discussion. He stated that the project is required to comply with higher standards of regulatory and supervisory expectations, especially due to its massive user base.
He also added that it was not clear how it would work out under the current regulatory system.
He declared that the Federal Reserve does not “have plenary authority over cryptocurrencies as such,” though he claimed that the Federal Reserve still has “significant input into the payment system.”
In July, Powell had acknowledged the possibility of a dominant cryptocurrency redrawing the current financial landscape — but as of yet, this has fallen short of maturing into a reality.