Cryptocurrencies are not likely to threaten the economy, but they entail considerable risks for investors, the US Federal Reserve chairman Jerome Powell said in his testimony to the House Committee of Financial Services on Wednesday.
In Powell’s words, “cryptocurrencies are great if you are trying to hide money, or if you are trying to launder money”. However, they could be especially harmful for “relatively unsophisticated” investors, putting their money in crypto tempted by surging prices. There is no promise behind positive price curves though, the US central bank’s governor told members of the Congress.
In addition to that, cryptocurrencies can also harm consumers, Powell noted, without elaborating further on this aspect.
The market for digital coins has expanded immensely over the past years and has witnessed a wide variety of applications of cryptocurrencies. However, Powell maintained that virtual coins are not big enough to be able to shake financial stability, confirming his position on the matter expressed in November 2017 at the confirmation hearing for his current post.
Now he made a parallel with traditional currencies, whose function is to act as a means of payment and to store value. According to the Fed governor, cryptocurrencies are not often used for payment, as “typically people sell their cryptocurrencies and then pay in dollars”.
As for the value of virtual tokens, Powell underlined they are too volatile and the value “is just not there”. As they lack intrinsic value, he claimed virtual currencies are not really a currency.
While in May former Fed chairman Kevin Warsh expressed support for a possible creation of a national cryptocurrency, Powell underlined on Wednesday the Fed is not looking to develop a state-backed digital coin.
This article appeared first on Cryptovest
