Federal Reserve Chairman Jerome Powell lambasted cryptocurrencies during testimony before the United States House Committee on Financial Services. Particularly, he noted that they present big risks to dummy investors and are great for storing illegal money.
The critique began when Powell answered the Republican Representative Patrick Mchenry’s question “to outline your thinking on cryptocurrency?” Powell immediately pointed out that cryptocurrencies do not yet present a threat to financial stability because “they are not big enough to do that yet.”
He proceeded to state that “they’re great if you’re trying to hide money or to launder it” which is why he believes cryptocurrencies are a challenge. He then stressed that digital currencies present big risks to investors noting that “Relatively unsophisticated investors see the asset go up in price, and they think: ‘This is great; I’ll buy this.’ In fact, there is no promise of that.” Ultimately, Powell added that it is not really a currency and does not have any intrinsic values and that “there are investor and consumer protection issues as well.”
Then he clarified that the Federal Reserve does not consider doing “anything like that,” meaning that it is not looking into the option of creating a digital currency — a striking difference compared with the Norwegian Central Bank’s intentions and the recent decision of Switzerland to launch an official crypto trading platform. He added, factually contradicting the recent report on the crypto’s ability to fulfill money criteria, that BTC and the alike are not a means of payment as you sell it for fiat money.
Nor is it a store of value. “Look at the volatility it (store of value function) is just not there,” said Powell.
The Chairman has never been a crypto admirer, albeit acknowledging its potential. In November 2017, he stated that “in the long, long run, cryptocurrencies and things of that nature could matter,” adding that blockchain — bitcoin’s underlying technology — could be something that “may have significant applications in the wholesale payments part of the economy.”
Concurrently, today it has also emerged that Brad Sherman, a Democrat Congressman, urged the authorities to prohibit U.S. persons from buying or mining cryptocurrencies. This is hardly a surprise given that in March he called crypto — “a crock.” Back then, the reaction from Twitter users was no less offensive than the Congressman’s assessment. For instance, Michelle L. Staton said “Wooow. Congressman Sherman is back and he’s displaying the same level of ignorance as before. He has literally no concept of underbanked people whatsoever. And he just suggested we’re going to have a major terrorist event financed via crypto. smh.”