US Fed: We’re not really interested in regulating cryptocurrencies
Cryptocurrencies are not currencies, and are just a drop in the financial ocean says the chairman.
The US Federal Reserve Chairman Jerome Powell has said that cryptocurrency regulation isn't particularly high on the organisation's to-do list, noting that they're not large enough to pose a threat to financial stability, they're not currencies and that he doesn't see them as being under the Federal Reserve's umbrella.
His concerns around crypto, he said, mostly focus on protecting the public from cryptocurrency as a relatively unregulated and highly volatile asset.
"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," he said of cryptocurrency, and literally any other asset class.
He also voiced concerns around the potential of cryptocurrency for tax evasion and money laundering.
"They are very challenging because cryptocurrencies are great if you're trying to hide or launder money, we have to be very conscious of that," he said.
Not a currency
"It's not really a currency. We're not looking at this as something that we should be doing ... Mainly I have concerns. If you think about what currencies do, they're supposed to be a means of payment and a store of value basically and cryptocurrencies are not used very much in payment ... and in terms of the store of value, if you look at the volatility it's just not there," Powell said.
He doesn't see cryptocurrencies as being a problem in the near future, or even in the medium run, but also added that distributed ledger technology "may have significant applications in the wholesale payments part of the economy."
"In the long, long run, cryptocurrencies and things of that nature could matter."
It's worth noting that the money in cryptocurrencies to date are still just a drop in the ocean. The total market cap of all cryptocurrencies according to CoinMarketCap is about US$287 billion at the time of writing. For perspective, that's approximately two McDonalds' worth, or 1.5 Coca Colas.
It's understandable why some the US Federal Reserve might eye that newfangled cryptocurrency thing as another digital fad, not yet worth too much time or attention.
At the same time, the sentiments voiced by Powell and other highlight the growing disconnect between the glacial pace of central banks, and the speed of cryptocurrency development. One hard-to-ignore trend that pops up every time a central bank spokesperson comments on cryptocurrency is that their speeches are out of date by the time they're spoken, and they tend to conflate bitcoin and every other cryptocurrency.
Blink and you miss it
Yves Mersch, a member of the European Central Bank executive board, once said that cryptocurrencies could never be currency because transactions were slow and expensive, because their prices are so volatile and because few merchants accept them. That was in February 2018, long after scaling solutions started coming to market, long after stablecoins picked up and at the same time as cryptocurrency payment systems were enjoying growing demand.
More recently BIS, the "central bank of central banks," presented a sharply critical and exhaustively researched report that was completely out of date and quite irrelevant by the time it was released. Now Powell has weighed in on behalf of the US Federal Reserve, to note that cryptocurrencies are rather volatile.
Banks tend to move at a glacial pace compared to most other industries, which might have simultaneously rubbed off on and been inherited from central banks.
Tech companies, meanwhile, are developing a thorough appreciation for DAGs and other high-throughput cryptocurrencies and are exploring how to use and offer stablecoins. Meanwhile many of the more forward-thinking people at financial institutions are deciding that cryptocurrency is where the real action is.
Technology and financial services have been moving together for a while, but in the past this has mostly taken the form of banks lethargically implementing tech solutions where it can make them an extra buck. But now cryptocurrency lets it take the form of tech companies offering banking solutions.
If central banks do decide they want to start exercising some control over the emerging space, and the non central bank digital currencies that spring from it, they're going to need to start running at the speed of technology, rather than just sauntering along at the pace of a bank.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA
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