REGULATION

Federal Reserve Chair: Cryptocurrencies are speculative assets without intrinsic value, not viable stores of value.

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Federal Reserve Chair: Cryptocurrencies are speculative assets without intrinsic value, not viable stores of value.

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Powell Calls Bitcoin a Substitute for Gold?

Federal Reserve Chairman Jerome Powell expressed his views on Bitcoin and other cryptocurrencies at an online summit hosted by the Bank for International Settlements yesterday. His statement that "cryptocurrencies are more of a substitute for gold than the U.S. dollar" has garnered significant attention from overseas media, with interpretations such as "Bitcoin and cryptocurrencies can replace gold" and "This is the first time Powell has hinted that Bitcoin is part of the global market." However, Powell's complete remarks were:

"Cryptocurrencies, such as Bitcoin, are highly volatile, so they are not truly useful as a store of value and have no intrinsic value support. They are more of a speculative asset. The positioning of cryptocurrencies leans more towards being a substitute for gold rather than a substitute for the U.S. dollar."

From a rational perspective, Jerome Powell referring to cryptocurrencies as a substitute for gold (without explicitly saying 'Bitcoin is a substitute for gold') does not mean he agrees that Bitcoin holds the same value as gold. His true message may simply be that "compared to the U.S. dollar, cryptocurrencies are closer to gold because both fall under the category of commodities."

Not in a Rush to Push CBDCs

On the other hand, the development of Central Bank Digital Currencies (CBDCs) is a hot topic among central banks worldwide. China can be considered the most advanced country in this area, as the People's Bank of China has conducted several pilot payment programs. In contrast to China's proactive stance, the Federal Reserve's pace is relatively slow, with Powell stating that the Federal Reserve is not in a hurry and promising to maintain transparency in the development stage:

"To move forward, we need support from Congress, the government, and the general public, and we are not yet truly ready to enter the public engagement phase. Therefore, you can expect us to maintain a cautious and transparent approach in developing Central Bank Digital Currencies."

Finally, Powell added that the U.S. does not need to strive to be the first to launch a CBDC. The world's largest country by nominal GDP (referring to the U.S.) must seek quality over speed.

No Need to Rush Like the Eunuch in Front of the Emperor

Although the Federal Reserve is not in a rush like CNBC, the relevant research teams are quite proactive. According to a report by Bloomberg, researchers from the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) announced that they will unveil a prototype of a Central Bank Digital Currency system as early as July.

James Cunha, in charge of the project, stated that the team will launch at least two platforms capable of moving, storing, and settling digital dollar transactions. The system aims to demonstrate the feasibility of implementing CBDCs. In contrast to the Federal Reserve's relaxed attitude, James Cunha said in an interview:

"We don't want to wait for the relevant policy debates because that would set us back by about a year."