The chairman of the US Federal Reserve may see a future in central bank digital currencies, but his colleague at the Minneapolis Federal Reserve is no friend of cryptocrypto.
At an event in Montana on Tuesday, Minneapolis Federal Reserve President Neel Kashkari likened cryptocurrencies to a “giant garbage dumpster.”
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In a hearing today of the U.S. House Committee on Financial Services, Federal Reserve Chairman Jerome Powell indicated that Facebook's work on a digital currency through Libra has shaped the U.S. central bank's progress on a central bank digital currency (CBDC). In the hearing, Rep. Bill Foster of Illinois asked Powell about recent comments from his colleague, Federal Reserve Governor Lael Brainerd. Foster took Brainerd's speech to mean that establishing a digital dollar would help preserve the...
“Only the US government has the authority to create dollars. That scarcity is in part what makes them valuable. In the virtual currency [and] cryptocurrency world, there are thousands of these garbage coins out there,” said Kashkari.
He said that people have been “fleeced for tens of billions of dollars,” and praised the SEC for “getting involved in cracking down on this.” Kashkari conceded that something useful might emerge in five or 10 years, but “so far, all that’s emerging is burning garbage,” and that “people are just getting fleeced by nonsense.”
In part, Kashkari is correct: huge amounts of money have been lost in hacks and scams. But Bitcoin has also made investors hundreds of billions: Bitcoin’s market cap over $170 billion, for instance. And huge companies, such as IBM, JP Morgan, and Facebook, are all investing in blockchain technology.
At the same time as Kashkari’s comments, the Fed is working on issuing its own central bank digital currency. At an event at Stanford University’s business school last week, Lael Brainard, a governor at the Fed, said the bank is “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC.”
And just yesterday, Federal Reserve Chairman Jerome Powell said he shared Brainard’s goals. “We feel that’s our obligation, technology has now made that possible. I think it’s very much incumbent on us and other central banks to understand the costs and benefits and tradeoffs associated with a possible digital currency,” he said.
