A penny for your thoughts.
For now, cryptocurrency volatility remains an isolated concern. Asked by Representative Patrick McHenry (R-NC) to outline his thinking on cryptocurrencies, Federal Reserve chair Jerome Powell said[1] that the digital assets are not yet big enough to present a serious threat to financial stability – a view that was separately shared by the Financial Stability Board[2] earlier this week.
In his testimony before the House Financial Services Committee on July 18, 2018, Powell touched upon common concerns about cryptocurrencies, including money laundering and investor protection. He also discussed the oft-mentioned "Fedcoin[3]," a rather dubious proposal for a Federal Reserve-issued cryptocurrency version of the US dollar. The idea for a US central bank digital currency (CBDC) has been around since at least 2014[4]. However, Fedcoin has received little interest from the Fed, and Governor Lael Brainard has rebuked[5] the suggested CBDC for its many shortfalls.
Of course, the world could have been very different if former Fed governor Kevin Warsh had become chair (indeed, he was among President Trump's final candidates[6] for the role). In May, Warsh told The New York Times[7] that he would have allocated resources "to think about the Fed creating Fedcoin, where we would bring legal activities into a digital coin." At the time, Warsh said the theoretical CBDC wouldn't replace cash, "but it would be a pretty effective way when the next crisis happens for us to maybe conduct monetary policy." ETHNews has previously written about the possibility of unconventional interest rate policies[8] through CBDCs.
On Wednesday, Powell clearly stated that the Federal Reserve is not considering a digital currency.
