Jerome Powell: Bitcoin "a Substitute for Gold," Not the Dollar

The public needs to understand the risks associated with Bitcoin, according to Federal Reserve Chair Jerome Powell.

During a webinar hosted by the Bank of International Settlements (BIS) on Monday, Powell said the Fed prefers to refer to cryptocurrencies as "crypto assets" rather than currencies, as their volatility makes them unsuitable as actual currencies.

“Crypto assets are highly volatile — see Bitcoin — and therefore not really useful as a store of value. They’re not backed by anything. They’re more of an asset for speculation,” Powell was quoted saying.

Instead, Bitcoin is "essentially a substitute for gold rather than the dollar."

While the U.S. itself is still contemplating the development of a central bank digital currency (CBDC) as is already being tested in a pilot program in China, Powell has a strong opinion on stablecoins, which he described as "an improvement" upon Bitcoin, but not the base of a future financial system:

"A global currency governed by the incentives of a private company is something that will deserve and will receive the highest level of regulatory expectations."

For its own digital currency, the Fed has "an obligation to be on the cutting edge" of research into its development, but doesn't need to be the first to launch a CBDC, Powell said. "The real threshold question for us is, does the public want or need a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments-oriented system?"