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Jerome Powell, the chairman of the United States Federal Reserve, recently made a positive remark about Bitcoin, which seemed to have influenced the asset’s price. Powell believes that the crypto asset will not be optimal for use as a currency due to its volatility and the fact that Bitcoin is “protected by nothing.” Powell, on the other hand, claimed that cryptocurrency can be used as a “substitute for gold.”
The Federal official made this remark during the Bank for International Settlements (BIS) live event on 22 March, in a response to a crypto-related question.
Powell was specifically questioned about his thoughts on Bitcoin and other cryptocurrencies, specifically whether these digital assets posed a threat to economic stability. Powell responded, saying:
“Crypto assets — we call them ‘crypto assets’ — they’re highly volatile, see Bitcoin, and therefore not really useful as a store of value, and they’re not backed by anything.”
Though echoing a widely held belief by many other regulators that Bitcoin is a speculative commodity, Powell added:
“They’re [cryptocurrencies and Bitcoin are] more of an asset for speculation, so they’re not particularly in use as a means of payment. It’s more a speculative asset, it’s [Bitcoin is] essentially a substitute for gold rather than for the dollar.”
Previously, Treasury Secretary Janet Yellen said that the digital currency “poses multiple problems, making Bitcoin incredibly inefficient for performing transactions” and a “highly speculative commodity.” This comment resulted in a negative market movement at the time. Similarly, in response to Powell’s remarks, the price of Bitcoin dropped by about $1,000.
BTC was trading at $57,016.85 at press time, down 0.4 percent in the previous hour.
BIS members also discussed another important topic; Powell continued to discuss stablecoins and CBDCs. He claims that:
“To the extent a stablecoin is backed by sovereign currencies of leading nations, that’s certainly an improvement over cryptoassets, I would say…But nonetheless, where’s the credibility come from? It comes from that sovereign currency that is the backstop.”