“Cryptocurrencies are great if you’re trying to hide money or if you’re trying to launder money. It doesn’t really have any intrinsic value so I think there’re investor or consumer protection issues as well,” – Chairman Powell commented. This issue has been raised multiple times before. Although cryptocurrencies such as Bitcoin don’t allow fully anonymous transactions, transfers made using these digital coins are much harder to trace and require more resources. So, unless very large sums of money are concerned and there is a clear need for it, regulators will not be willing to spend the resources that are required to find out the sources of the transactions. Naturally, this makes the new technology perfect for people who are trying to launder money without leaving any trace. In the traditional banking system, there are procedures in place to prevent money laundering. In the unregulated cryptocurrency market, no due processes exist.
Fed chairman also emphasized that the sole appeal of the cryptocurrencies has been the increasing prices, which attracted a lot of new investors. In his opinion, these investments are purely speculative and do not lend any legitimacy to the new technology. “If you think about what currencies do, they’re supposed to be a means of payment and a store of value, basically. And cryptocurrencies…they’re not really used very much in payment. Typically people sell their cryptocurrencies and then pay in dollars. In terms of a store of value, you know, look at the volatility and…it’s just not there,” – was Chairman Powell’s answer to the question whether these digital coins constituted currencies or not. This question has been raised multiple times around the world. Only a handful of countries have answered it for regulatory purposes, some declaring that cryptocurrencies are assets and others treating them as currencies. Judging by the comments of the Fed chairman, it is not likely that the latter will be the case for the United States.