During a House Financial Committee hearing on Wednesday, chairman of the Federal Reserve Jerome Powell called out cryptocurrency investors to be stupid and “unsophisticated”, people who have no idea of what money is or what it looks like. However, the future is indeed in the safe hands of sophisticated fellows like Congressman Brad Sherman of California, who believes that the government should, with an iron fist, ban the use of cryptocurrencies, and save all of the people in the process from their misguided “animal spirits”.
During his testimony to Congress, once the topic of conversation was shifted to cryptocurrencies, Powell maintained his stance from last November, claiming such digital assets to be too insignificant to affect the financial system. He did, however, hit a blow to investors who have supported coins like Ethereum or Bitcoin.
“Relatively unsophisticated investors see the asset go up in price, and they think, ‘This is great; I’ll buy this,'” Powell explained. “In fact, there is no promise of that.”
Powell’s skepticism has its own illogical base, of course. He had deduced alt-coins as investments that came with no guarantee, while later he explained how they weren’t real money because they have no intrinsic value and cannot commonly be used for payments.
Clearly, men like Powell believe that Bitcoin and other similar altcoins are built wholly on speculation, but are unable to see this speculation in terms of the potential held. While we are indeed much short of a situation where such coins may be used in everyday transactions, but their investment value promotes their use and backing to bring us to closer to such a reality. This might be all the more important as it has been pointed out by experts that digital currencies indeed provide a store of value in “environments where trust is a problem”, although they really aren’t backed by physical goods and therefore lack any intrinsic value.
Powell also made several other ignorant comments regarding cryptocurrencies, like their connection to money laundering. While it is true that altcoins like Bitcoin, owing to their anonymity and decentralisation, are used for shady activities, this fact cannot disqualify them as proper alternatives to the monetary system in place at present. It doesn’t provide any agreeable reason to ban altcoins either. “It is true that criminals have used Bitcoin,” explained Norbert Michel, director of the Heritage Foundation’s Center for Data Analysis, “but it’s also true that criminals have used airplanes, computers, and automobiles.”