New Fed Chair Powell Has Bitcoin On His Mind

Fed Governor Jerome “Jay” Powell, the favorite to be named the next head of the U.S. central bank, already has some strong opinions about bitcoin.

President Donald Trump is expected to announce his pick for the next Federal Reserve chair this week. The current chair, Janet Yellen, is scheduled to end her term in February.

I have “nothing against bitcoin, nothing against, you know, private currencies,” Powell said in June at The Economic Club of New York, according to a CNBC news report. They are “associated with money laundering and those sorts of issues, but we’re not broadly opposed or supportive of alternative currencies. I think from a Fed standpoint, I would say I am very cautious of the idea of a Fed digital currency.”

While JPMorgan Chase CEO Jamie Dimon called bitcoin a “fraud,” he also recently admitted that he would be more comfortable with a government-backed digital currency. In addition, the Bank for International Settlements said in a September report that central banks may one day need to issue their own cryptocurrencies.

But Powell has already spoken about several challenges for widespread adoption of distributed ledger technologies, especially for central banks to issue digital currencies.

The key difficulties are “meaningful technical challenges” and “privacy issues,” Powell said. In addition, he said a central bank-issued digital currency “may stifle innovation over the long run,” since it would compete with improvements in federal payments technology and private sector innovations.

“Powell has warned that any shift towards digital currency would raise serious issues regarding security against cyberattacks and combating illegal activity,” said Benn Steil, senior fellow and director of international economics at the Council on Foreign Relations. “Policy on digital currency broadly, however, will remain largely with the Treasury.”