Fed Chairman Powell has said that a globally prevalent cryptocurrency could conceivably remove the need for reserve currencies.
The Chairman of the United States Federal Reserve has said that a globally adopted cryptocurrency system could conceivably remove the need for reserve currencies.-
Testifying before the Senate Banking Committee on July 11, Fed Chairman Jerome Powell gave his analysis of whether a cryptocurrency system with global prevalence could diminish -mdash; or even go so far as to remove the need for -mdash; so-called anchor currencies.-
With the U.S. dollar de facto the world-rsquo;s dominant reserve currency, Powell acknowledged the possibility of a preeminent cryptocurrency redrawing the current financial landscape -mdash; yet noted that as of yet, this has stopped short of becoming a reality. The Fed chairman said:-
-ldquo;I think things like that [the obsolescence of today-rsquo;s reserve currencies] are possible but we really [-hellip;] haven-rsquo;t seen widespread adoption. Bitcoin is a good example, almost no one uses it for payments [...] it-rsquo;s a speculative store of value like gold.-rdquo;
Powell-rsquo;s comparison is noteworthy given the Federal Reserve Bank of New York-rsquo;s role as a custodian for the gold held by entities such as the U.S. and foreign governments, other central banks, and official international organizations.-
Powell acknowledged that the prospect of cryptocurrencies coming to replace reserve currencies has been implied since their inception and that its realization could see the global financial system -mdash; and specifically the Federal Reserve System -mdash; profoundly transformed. He noted:-
-ldquo;People have been talking about this since cryptocurrencies emerged, but we haven-rsquo;t seen it. That-rsquo;s not to say we won-rsquo;t -mdash; and if we do, then yes, you could see a return to an era in the United States where we had many different currencies, in the so-called national banking era.-rdquo;
As reported, Powell had testified before the House Financial Services Committee earlier this week and acknowledged that the impact of Facebook-rsquo;s forthcoming stablecoin Libra could be of a -ldquo;potentially systemic scale-rdquo; for the global financial and regulatory landscape.
In China, central banking veterans have characterized the widespread anticipation of Libra as being -ldquo;inseparable from the global dollarization trend,-rdquo; and stressed that Beijing should respond with precautions and rigorous policy research to seek to maintain a strong monetary status.