Cryptocurrencies will not replace the US dollar: Jerome Powell

Abigail Brewer 4 years ago 3 min read

Mexico City.

Cryptocurrencies are not a substitute for the dollar due to their high volatility. “They are just speculative assets, without support of any kind,” the Prime Minister said. Federal Reserve (Fed) From the United States, Jerome Powell.

By participating in the Innovation Summit organized by the Bank for International Settlements (BIS), he indicated that cryptocurrencies could be an alternative to gold instead of dollars.

We prefer to call them cryptocurrencies rather than cryptocurrencies. It is very volatile and thus not really useful as a backup value. They are not backed by anything, they are speculative assets and are not a means of payment. “

He also added that the US Central Bank is in no hurry to create a digital dollar. “There are still many steps to be taken.”

He noted the need to engage Congress and the White House and educate the public about the use of this digital currency.

With regard to the collaboration with the Massachusetts Institute of Technology (MIT) digital currency initiative, he said it is focused on investigating the possibilities and limitations of the technologies, not on trying to create a prototype. “We will try to establish the foundation and see what we learn.”

He considered that the launch of a digital currency would be a very important step for the financial system, but insisted that it required careful planning. “We have an obligation to be at the forefront in understanding the technological challenges, as well as the potential costs and benefits.”

Agustín Carstens, Director General of the Bank for International Settlements, emphasized that owning a digital currency would be a sovereign decision for every country. “The central bank in each country must decide whether to take this step or not.”

A BIS survey of central banks in developing countries and other advanced economies indicates that eight out of 10 institutions are looking at digital currencies, while others said they are undergoing experimental tests to use this currency in their own countries.

This study was conducted in early 2020, and according to the participants, it is likely that in three to six years, the digital currency will already be in circulation in different countries.

A financial system should be like a tree, the stronger its roots, the better for it to respond to economic shocks. The big banks are investing in this, but there are issues that need to be resolved. “

He noted that an issue Cybersecurity is essentialAs well as technical proficiency. “We cannot tolerate any degree of error because if people trust this system and they will exchange values in this way, we will not find that the system has fallen or that there are 001% errors. This is unacceptable, there cannot be a margin of error.”

He stressed that greater international coordination is also required to facilitate transfers, to determine how they are expressed in capital flows, to determine whether foreigners can obtain them, and so on.