Crypto “Completely Failed” as Payments System: Fed Chair Powell

Key Takeaways

• Federal Reserve chairman Jerome Powell said that cryptocurrencies had “completely failed” as a payment system in testimony before the Senate Banking Committee.
• He also discussed stablecoin regulation and the possibility of a digital dollar.
• Powell claimed that a CBDC would negate the need for cryptocurrencies in testimony yesterday.

Powell also commented on the possibility of a digital dollar. 

Powell Discusses Crypto 

Federal Reserve chairman Jerome Powell has aired more thoughts on cryptocurrencies. 

Speaking in testimony before the Senate Banking Committee, Powell discussed cryptocurrencies from a payments perspective, possible regulatory action for the space, and the potential impact of developing a central bank digital currency in the United States. 

During the testimony, Powell argued that cryptocurrencies had been unsuccessful as a payments system. He said: 

“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they completely failed to become one (except for people who desire anonymity, of course, for whatever reason).”

He added that the U.S. should “appropriately regulate” stablecoins, but said that he was “legitimately undecided” on if a CBDC would have more benefits or drawbacks for the economy. 

Powell also discussed inflation and said that frothy market conditions were responsible for Bitcoin’s recent volatility. The Fed chair’s latest comments come a day after he claimed that the U.S. “wouldn’t need” cryptocurrencies if there was a digital dollar in circulation as part of the same testimony. In February, meanwhile, Powell told the Senate Banking Committee that a digital dollar was a “high priority.” 

Powell’s thoughts will doubtless be a point of controversy to many crypto enthusiasts. As stablecoins and other assets like ETH are popularly used for payments today, the suggestion that the asset class has failed as a payments system will likely be seen as inaccurate to some. 

Moreover, with the digital assets space drawing so much interest in recent months, it’s unlikely that a digital dollar would eliminate the demand for crypto in the U.S. 

Powell’s allusion to stablecoin regulation is also notable. As the demand for stablecoins has grown, central bankers have looked on with concern about the impact they could have on the traditional monetary system. It’s still unclear what regulation would look like for coins like USDC and USDT, as well as more decentralized dollar-pegged assets like DAI and RAI. 

Powell has previously discussed CBDCs, remarking that launching one would have potential benefits and drawbacks for the U.S. The Fed is due to publish a report on the possibility of a CBDC in September. 

Disclosure: At the time of writing, the author of this feature held USDC, USDT, and several other cryptocurrencies. 

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