Fed Governor Jerome Powell had more to say about cryptocurrencies in his testimony to the House Financial Services Committee Wednesday.
Bitcoin-skeptic Powell cautioned the ‘unsophisticated’ investors about the potential financial, legal, customer protection, and security-related risks that they were exposing themselves to by investing in cryptocurrencies.
“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. There are investor and consumer protection issues as well,” Powell said
He also clarified several stances including that virtual currencies are not legal tender and that such currencies have no protection. Powell added that Bitcoin and the likes don’t have any intrinsic value and are not backed by any kind of assets, and therefore its prices are based entirely on mere speculation resulting in spurt and volatility.
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Powell reiterated that the US central bank doesn’t regulate this asset class and has no plans bring cryptocurrencies under its jurisdiction. And contrary to rumors, the central bank will not develop cryptocurrency of its own.
“Federal agencies like the Securities and Exchange Commission and Commodity Futures Trading Commission, as well as state authorities already oversee many crypto-related businesses, and have shuttered some that have operated illegally,” he explained.
The governor, however, wasn’t all negative, concluding that we live in a time of extraordinary technological change. He added that the regulators should be open to the new ideas and innovations that will drive economic growth and improvements in the financial system.
Powell previously acknowledged that in the long run cryptocurrencies and things of that nature could matter, adding that blockchain could be something that “may have significant applications in the wholesale payments part of the economy.”