The chairman of the Federal Reserve of the United States has said that cryptocurrencies, having no value in themselves, pose a serious risk for investors. He said this at a congressional hearing session on Wednesday, in testimony to the House Financial Services Committee.
Fed chief Jerome H. Powell has said the risk factor in currencies like Bitcoin or Ethereum is because they are not tied to governments, nor are they backed by precious metals. He maintains that relatively inexperienced or unsophisticated consumers would definitely want to invest in a token when he sees the asset go up in price, but there’s absolutely no guarantee of anything. He says there are other issues as well regarding the protection of investors and consumers.
Powell also added that the Federal Reserve views these digital assets to be a risk factor to consumer protection, and it has no plans to develop its own token, contrary to rumours.
According to information from Coindesk, the world’s leading cryptocurrency Bitcoin saw a 1.5% rise in price last Wednesday, weighing in at $7,430.
Digital currencies have grown immensely in popularity over the past few years and has found investors and supporters in some very well recognised Wall Street faces, including Bill Miller, and Tom Lee of Fundstrat. Bitcoin reached its peak value last year and was, for a brief period, priced at above $20,000. However, there has been a sharp decline since then.
Powell used the opportunity to also reaffirm the intentions of the Federal Bank to gradually increase the rates of interest. In his two days of testimony, including the one in Tuesday in front of the Senate Banking Committee, we have seen concerns expressed by lawmakers over President Trump’s new trade tariff policies, and Powell has expressed the same concerns. Trump had recently announced his decision to impose tariffs on products imported into the US from the European Union, and in return was greeted with reciprocal tariffs of imported US goods as well.
“A more protectionist economy is an economy that’s less competitive, less productive,” he explained. “We know that. It’s not a good thing if that’s where this goes.”