The Federal Reserve Chairman Jerome Powell dismissed the notion of Bitcoin as a replacement for the U.S. dollar, instead framing the leading crypto as a speculative asset comparable to gold. Powell shared his insights during an appearance at The New York Times DealBook Summit in Manhattan, emphasizing Bitcoin’s volatility and limited use as a form of payment or store of value. According to Powell: It’s just like gold, only it’s virtual… It’s very volatile, it’s not a competitor for the dollar, it’s really a competitor for gold. That’s how I think of it.”
Powell’s comments come amid heightened speculation about Bitcoin’s growing influence in global finance. Crypto recently achieved a market capitalization of $1.92 trillion, surpassing silver, valued at $1.75 trillion, to become the world’s eighth most valuable asset. However, it remains far behind gold, which holds an estimated market value of $18 trillion. This is not the first time Powell has used this comparison to address Bitcoin. In 2021, the Fed chair said that crypto is not useful as a store of value due to its intrinsic volatility, with Bitcoin being “essentially a substitute for gold, rather than for the dollar.”
Under President Joe Biden’s administration, the Fed is accused of being pivotal in Operation Chokepoint 2.0, an alleged plan to hinder the progress of the US crypto industry. In August, following a Fed mandate directed at crypto-friendly Customers Bank urging tighter risk management and compliance measures, Gemini co-founder Tyler Winklevoss stated that the initiative “is alive and well”.
Despite Powell’s conservative tone toward Bitcoin and crypto as an asset class, Fed Governor Christopher J. Waller recently praised DeFi as an ally. At the Vienna Macroeconomics Workshop on Oct. 18, Waller argued that intermediaries are still fundamental for the financial markets. However, he acknowledged that DeFi applications presented technologies that offer efficiency to traditional financial instruments.
He recognized the benefits of distributed ledger technology (DLT), tokenization, and smart contracts, which can enhance the speed and accuracy of financial transactions. Moreover, Waller recognized at The Clearing House Annual Conference 2024 on Nov. 12 that central bank digital currencies (CBDC) are not helpful for payments, questioning whether the payments system has a problem that CBDCs could solve.
