FED’S POWELL WARNS PUBLIC VS BITCOIN RISKS

Federal Reserve Chair Jerome Powell said that the US public needs to understand the risks behind Bitcoin and other cryptocurrencies, even as the central bank itself is studying the potential costs and benefits of a digital dollar.

Powell said the Fed prefers to call crypto coins “crypto assets,” because their volatility undermines their ability to store value, a basic function of a currency, Christopher Rugaber reported for the Associated Press (AP.)

“They’re highly volatile, see Bitcoin, and therefore not really useful as a store of value,” Powell said in remarks to a virtual summit hosted by the Bank for International Settlements.

“They’re more of an asset for speculation. So they’re also not particularly in use as a means of payment. ... It’s essentially a substitute for gold rather than for the dollar.”

Bitcoin has soared nearly ten-fold in value compared with a year ago, hovering around $57,000 on Monday.

That is up from $5,830 in March 2020. It is often seen as a hedge against inflation, and inflation fears have risen as the Fed has kept its short-term benchmark interest rate pegged near zero for the past year.

The Fed is also injecting $120 billion into the banking system each month by purchasing Treasurys and mortgage-backed securities.

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