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US Fed Chair Jerome Powell Grilled Over FedCoin Digital Currency Progress

Federal Reserve Chairman Jerome Powell testified before the US House Financial Services Committee on the state of the US economy and monetary policy.

Rep. Bill Foster of Illinois spent his entire five minutes asking Powell about the progress being made regarding the topic of CBDC or central bank digital currencies.

Foster questioned Powell concerning the potential for a CBDC and how it can impact the suffering economy. Powell was honest in saying that the dollar is holding fine, particularly when compared to the failing currencies of other currencies. The Fed chair acknowledged the significance of the dollar to the financial systems of the United States.

Powell stated,“I think having a single government currency at the core of the financial system is something that has served us well. It is a highly basic thing, which has not been in question.”

The Fed chair is embracing digital currency efforts and told the House committee that “we are working hard on it.” The ultimate aim is to digitize the dollar in the future, which has been triggered since debates started over Facebook’s Libra plans. Such ambitious plans are in line with the Federal Reserve’s previous announcement that it is conducting experimentation and research related to potential use cases for digital currencies.

While addressing the Congress meeting, Powell acknowledged that there was a risk involved in central banks taking up the responsibility of blockchain and cryptocurrency. He revealed that the Fedcoin plan was first proposed to combat the idea of privately-owned cryptocurrencies. Powell admitted that banks around the globe are looking into central bank digital currencies.

Powell said: “Currently, every major central bank is taking an in-depth look at that. We feel that it is our obligation being that now technology has that possible. I think it is much necessary for us and other central banks to understand the benefits and costs associated with a possible digital currency.”

China’s digital yuan a wake-up call for the US

Foster asked Powell about the current Fed’s plan in responding to China’s efforts to launch a digital yuan. Powell responded that they have visibility regarding China’s efforts. He identified that China and the US are different when racing central digital currency. He said, “They are in an entirely different institutional context.”

The Fed chair stated that China is building digital currency in a completely different institutional context. He further mentioned that China’s position on cryptocurrencies is quite different from Bitcoin. China wants to develop a digital currency, which is run and centralized by the Chinese government, but Bitcoin functions on a free and decentralized model. In the US, where consumers are used to privacy and freedom, any financial ledger where the government has access to all the data would be greeted with intense scrutiny.

Powell emphasized that the Federal Reserve has not officially initiated the launch or creation of a digital dollar. He said, “We’ve not decided to conduct this. There are several questions, which should be answered around a digital currency for the US, including issues concerning privacy issues, cyber issues, and several operational alternatives as they present themselves. So, we are going to be working through all of that and do that work responsibly and thoroughly.”

However, Foster is concerned that if the federal government does not react and develop a plan for a digital currency quickly, then potential competitors like China could launch central bank digital currencies and consequently gain an upper hand. Foster pointed out that China’s intention to implement the digital yuan among nations involved in its Belt and Road initiative could put the dollar’s world reserve currency status at risk.

Image via Bloomberg

Fed Chair Powell Asserts Money Supply is for Central Banks not Private Sector

Federal Reserve Chairman Jerome Powell asserted that the private sector has no place in money issuance, and by extension the development of a Central Bank Digital Currency (CBDC).

The House Committee on Financial Services met again yesterday, and an interesting exchange took place between Fed Chairman Jerome Powell and Representative Tom Emmer (R-MN) over whether CBDC should be developed in a private-public partnership.

In the hearing on June 17, as the topic turned to CBDC, Chairman Powell made his feelings clear that he did not view the private sector as having any place in money issuance.

Where is the Digital Dollar?

In a previous open hearing by the House Committee On Financial services the Honorable Christopher Giancarlo once again advocated for the use of a Central Bank Digital Currency (CBDC) as an effective means of stimulus distribution and added that China is gaining a lot of ground in this regard.

But how far off is a United States CBDC or digital dollar? That was the question posed by Representative Emmer, a ranking member of the Fintech Task Force, to the Fed Chairman as he questioned, “What substantive recent actions has the Fed taken to understand and experiment with this technology?”

While Powell responded to the inquiry, his answer was very vague and diplomatic. He simply said that the US Government has an obligation to the public to keep them up to speed with innovation. He added, “If this (CBDC) is something that is going to be good for the United States economy and for the world’s reserve currency, which is the dollar, then we need to be there and we need to understand it first and best.”

No Place for the Private Sector in Money Supply

Later in the hearing, Powell also responded to the initiatives of the Digital Dollar Project, which is headed up by former CFTC Chairman Giancarlo—who has expressed a need for the digital dollar or a CBDC to be developed through a private-public partnership.

Powell clearly expressed that neither he nor the Federal Reserve were interested in such a collaboration. He said, “The private sector is not involved in creating the money supply. That’s something that the central bank does.” He added, “I don’t really think the public would welcome the idea that private employees who are not accountable solely to the public good would be responsible for something this important.”

It is unclear what accountability Powell refers to, as the US government continues to print money from thin air with seemingly little thought for the consequences on the dollar’s value and the incoming inflation that will be felt globally.

Protecting the Dollar

The response of Chairman Powell regarding the private sector being involved in money issuance should come as no surprise as the US Government has, throughout their history, gone to extreme measures to retain control of the defacto global currency in the US Dollar.

The inception of cryptocurrencies like Bitcoin, which, was essentially built to potentially destabilize and displace the central source of power for our governments—their control over traditional financial systems and monetary issuance—has been a growing concern to the United States.

US authorities and regulators have famously hammered Facebook’s Libra project into submission as a token supported by two billion users was again too much of a threat to their monetary control. US regulators also clearly encroached on the rights of other sovereign nations when they banned the distribution of Grams and the launch of the TON, not just in the US but globally.

President Trump has been incredibly outspoken on the subject of Bitcoin and also believed Facebook’s Libra to have little standing or dependability. Last year he was quoted saying, “We have only one real currency in the USA. It is by far the most dominant currency anywhere in the world, and it will always stay that way. It is called the United States Dollar!”

Federal Reserve “Flexible” Inflation Monetary Policy Could Boost Bitcoin Price as Investors Stock Up on BTC Safe Haven

Federal Reserve Chair Jerome Powell has announced the United States central bank’s new measures to control inflation, in a speech that could have long-term implications for the Bitcoin price and cryptocurrency.

The much-anticipated speech on inflation control by Federal Reserve Chair Jerome Powell took place via webinar at the Jackson Hold symposium on Thursday, Aug 27—and revealed the US central bank is prepared to let inflation rise above its traditional 2% target but did not rule out further quantitative easing.

While the Federal Reserve’s long-term goal is an inflation rate of 2 percent the flexibility of the policy will most likely see periods of much higher inflation. The Chairman’s speech emphasized that the central bank’s actions to achieve economic stability will be most effective if longer-term inflation expectations remain well-anchored at 2 percent. Powell explained that if inflation runs below 2 percent following economic downturns and never moves above 2 percent even when the economy is strong, it will ultimately “pull realized inflation down” which would be far more devastating for the United States economy.

Federal Reserve Chair Powell said:

“To prevent this outcome and the adverse dynamics that could ensue, our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.”

Inflation and Bitcoin

Despite the implication of the Federal Reserve that it will “flexibly” allow inflation to run higher than usual for the next few years, the Bitcoin price and the gold price immediately dipped at the announcement. But shouldn’t higher inflation mean a weaker dollar and a rise in the BTC price and the gold price?

The rationale could be that Bitcoin and Gold were already consolidating due to the bitcoin price and gold price rallies over the last couple of months. Currently the United States national debt stands at $26.5 trillion and Goldman Sachs recently warned that the dollar is in serious danger of losing its global reserve currency status—and a loss of value in the dollar should equate to a rise in Gold and Bitcoin safe haven asset prices rising.

Bitcoin Hedging

Over the last few weeks, some major enterprises and investors have also stepped into the Bitcoin arena and given the safe haven asset their support. On-chart analysis has also shown a massive increase of Bitcoin whales in the build-up to the Federal Reserve announcement, the data shows that there are now more than 2000 wallets holding over 1000 BTC, accounting for over $90 billion worth of BTC in long-term holdings.

The oncoming inflation has been predicted by the likes of investor Jim Rogers who warned in a recent interview, that the efforts of global central banks to stimulate their respective economies through the creation of trillions of dollars in the currency in the COVID disruption will end badly.

Warren Buffet, while still not an advocate of Bitcoin, said that the United States’ stock market is currently at dot-com bubble levels using the Buffett Indicator—which divides the Wilshire 5000 Index by the GDP of the US and could be another bullish signal for the uncorrelated Bitcoin price.

Enterprises have been consolidating on Bitcoin as well now seeing its value as a hedge asset, only two weeks ago publicly-traded billion-dollar software firm MicroStrategy announced its new capital allocation investment strategy — with a purchase of 21,454 Bitcoins. MicroStrategy is the largest independent publicly-traded business intelligence firm used by many of the Fortune Global 500 brands. While yesterday, Fidelity Digital Assets also validated a stock-to-flow valuation model created by Plan B, which predicts Bitcoin’s price at $1 million. The company examined ways that could attract investors to Bitcoin as an investment and noted that Bitcoin is increasingly integrated into traditional investment portfolios.

While the minor pullback in the Bitcoin price may seem discouraging, the overall outlook is extremely bullish for both gold and Bitcoin. Legendary wall street investor George Ball has even marked September 7 as the day he expects the Bitcoin bull run to take off. Ball believes a migration will “ignite” from traditional finance to Bitcoin trading and hedging as citizens will look to secure their wealth in an asset that cannot be “undermined by the government.”

Federal Reserve FOMC Meeting Inflation Targets Might See Bitcoin Price Retest $10,400 Resistance

The Bitcoin price opened slightly in the green this week after sharply against the $10,500 resistance on Sunday back to the $10,300 level. It appears that Bitcoin traders are possibly waiting on the Federal Reserve’s upcoming policy meeting on Wednesday— which should see the United States central bank explain how it will put its flexible inflation policy into action.

There still remains a lack of clarity from Federal Reserve Chair Jerome Powell on exactly how the central bank will push inflation rates towards or above the benchmark target of 2%, since his announcement at the annual economic policy symposium two weeks ago.

As previously reported, Bitcoin’s scarcity has transformed the crypto asset into a reliable safe-haven asset, and it currently bears its strongest correlation to gold. Analysts like the Winklevoss Twins, Paul Tudor Jones and even George Ball now view BTC as a reliable hedge against debasing monetary policy and believe higher inflation will push the Bitcoin price higher.

Fed, Inflation and Bitcoin—Likely Outcomes

Bitcoin investors will turn their attention this week to the Federal Open Market Committee’s (FOMC) September meeting, along with two key reports on the state of the consumer in the United States.

The FOMC’s upcoming meeting Tuesday and Wednesday will come just two weeks following the Federal Reserve’s annual economic policy symposium, during which Chair Jerome Powell announced a new framework to enlighten the public on the FED’s upcoming rate-setting in light of current monetary inflation. The updated framework will allow for a moderate overshoot of their 2% inflationary target, alleviating the urgency for officials to step in and raise rates to stave off a run-up in inflation.

Further clarification from the FED on how it plans to reach its inflation targets over the next couple of years could push the Bitcoin price higher to retest the $10,400 resistance, clearing it will be another matter.

A leading Nomura economist, Lewis Alexander believes the Federal Reserve officials have reached no consensus on the timing of the forward guidance release.

Alexander said:

“Recent comments from FOMC participants suggest a consensus for stronger, outcome-based forward guidance or significant changes to asset purchases remains some ways off.”

If the Federal Reserve remains vague on the details on Wednesday, it will most like send Bitcoin below the $10,000 support. As reported by Blockchain.News—breaking this critical $10,000 support with the recent rejection of continued stimulus will create a lack of retail investors to combat the selling pressure— which would most likely send the Bitcoin price as far down as $8,000.

Federal Reserve Chairman Powell to Address IMF on Digital Currencies Next Week

Federal Reserve Chairman Jerome Powell will be speaking to the International Monetary Fund (IMF) next week as part of its panel on the future of cross-border digital payments.

Fed Chair Jerome Powell will speak next week at the IMF’s annual meeting as part of a panel that will discuss digital currencies and cross-border payments.

The panel discussion which will be webcast at 8 am ET on Monday, is entitled “Cross-Border Payment—A Vision for the Future.”

Other members of the IMF’s panel include Agustín Carstens, general manager of the Bank for International Settlements; Nor Shamsiah, Governor of Bank Negara Malaysia; and Governor of the Saudi Arabian Monetary Authority Ahmed Abdulkarim Alkholifey, whose central bank is collaborating with the UAE on a blockchain-based transaction platform.

Along with Fed Chairman Powell, the panelists are set to discuss the benefits and risks of cross-border digital currencies and their policy implications, according the IMF.

Although it is not clear whether it will be included in Powell’s discussion—the Federal Reserve has grown bullish on digital payments technology as the COVID-19 pandemic has highlighted the need to provide faster methods of relief. The United States central bank has announced the accelerated development of its own platform—FEDNow and is also working on a CBDC known as the digital dollar.

Two Major Events Will Influence the Bitcoin Price in the Next 24 Hours

Bitcoin and cryptocurrency traders face a moment of pause as they await two major events that will likely either send the BTC price soaring or cause a major bearish correction in the crypto markets.

The Bitcoin price is currently hovering around the $11,400 per Bitcoin and has moved in line with the mainstream equity markets over the last two months.

Despite the fanfare made regarding Square’s recent $50 million investment into Bitcoin and joining the list of public companies hedging with the crypto asset—the BTC price has remained mostly uninfluenced by what many have viewed as a catalyst for further mainstream investment.

However, in the next 24 hours—two events will occur that could give Bitcoin traders the buy or sell signal they are seeking. The first is that in the next few hours, Federal Reserve Chairman, Jerome Powell is set to speak on the digital currencies at the International Monetary Fund’s (IMF) annual meeting.

The second event is the impending deadline on a pre-election round of stimulus—set by House Democrat Speak Nancy Pelosi for the Trump Administration to reach a deal with Democrats by Tuesday, Oct. 20.

Fed Chairman’s Influence on BTC Price

As reported by CNBC, on Feb. 12, Fed Chairman Powell’s address to Congress in which he appeared to acknowledge the power of digital currencies had a significant impact on the Bitcoin market, sending the BTC price surging above the $10,000 mark for the first time in 2020.

In his testimony in front of Congress on Tuesday, Powell was asked about central bank digital currencies and the Fed’s view on a digital dollar. The Fed Chairman acknowledged that Facebook’s Libra project served as a wake-up call that a digital currency could come “fairly quickly” and in a way that is “quite widespread and systemically important.”

Depending on what Powell says in today’s panel at the IMF on digital currencies, comments along the same lines as those in February are likely to send the BTC price higher. Fed Chair Jerome Powell’s panel will be webcast at 8 am ET on Monday, and is entitled “Cross-Border Payment—A Vision for the Future.”

Democrat Pelosi’s Pre-Election Stimulus Deadline

The second factor sure to move the Bitcoin price needle one way will be the outcome of the Democrats ultimatum to reach a consensus on a pre-election stimulus package with the White House by Oct.20.

As reported by Blockchain.News, Senate Democrat Nancy Pelosi has put a hard deadline on the stimulus negotiations between Democrats and Republicans as no agreement has yet been reached. House Democrats have proposed a $2.2 trillion relief package, and although President Donald Trump has said that he’s prepared to go beyond his own party’s $1.8 trillion proposal—Senate Republicans remain in favor of a much more modest package and have been pegged as unlikely to support Trump in this compromise.

This outcome of Pelosi’s ultimatum should affect the Bitcoin price one way or the other—largely based on the bet by investors that the trillions in government and central bank money printing and relief spending globally in response to the COVID-19 market disruption will likely lead to very high inflation and US dollar debasement.

This inflation theory is currently being heavily supported by an onslaught of public companies and notable Bitcoin investors such as the Winklevoss Twins and Max Keiser.

For now, a further impasse between the Republicans and Democrats on reaching a stimulus amount agreement could see the Bitcoin price stall or even fall slightly. However, should the two sides reach an agreement by Tuesday, the price of BTC should also rise significantly.

Fed Reserve Chair Says Central Bank Needs to Issue Digital Currency Right not First

According to Jerome Powell, the Federal Reserve Chair, the United States will not be cutting any corners with its potential central bank digital currency (CBDC) or digital dollar, choosing not to aim to do it first but do it right.

During the panel discussion on Oct 19 at the annual meeting of the International Monetary Fund (IMF), Powell clarified the US plans for a CBDC. The Federal Reserve chairman said that the he is less concerned about other countries being first with their own CBDC issuance than he is with the United States getting their own digital dollar right.

CBDC Issuance

There are a number of ways that a CBDC might improve the payments system, and it is mainly this area that motivates our interest […] For the Federal Reserve, our main focus is on whether and how a CBDC could improve an already safe, effective, dynamic, and efficient domestic payments system.”

Powell discussed that while the US central bank is still examining the benefits of digital currency or digital dollar, he argued that they had to do it right rather than doing it first. The Fed Chair stated that the US, unlike many other countries, already has a highly banked population. Speaking at on the IMF’s panel on cross-border payments, he stated:

“We have a highly banked population so that many—although not all—already have access to the electronic payments system.”

The Fed Chairman later said:

“We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done. […] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.”

Talking about private solutions like Libra, Powell mentioned that such cryptocurrencies and stablecoins are likely to promote innovation that is why private players have to work together with central bankers. He said: “We need to work to collaborate. The private sector is likely to be able to contribute to broad innovations.”

China Closing on Its Digital Currency

Another important question concerns the U.S’s stance on China’s recent progress to launch its CBDC, which is already much ahead. Powell responded that each nation has to carefully consider their own stance in CBDCs. He also revealed that about 80% of all central banks are working on developing their own CBDCs. In its latest move to test its DCEP, the People’s Bank of China (PBOC) issued 10 million-yuan ($1.5 million) worth of digital currency to 50,000 people in the city of Shenzhen via a lottery. Those who were successful obtained digital “red packets” worth an estimate of 200 yuan that they could download and spend such digital funds at more than 3000 merchants in Luohu district. The China’s Central Bank stated that it plans to launch its national digital currency later this year, though it’s yet to set a date.

Fed Chair Powell Says Central Bank Will Engage with US Lawmakers On Digital Dollar

Federal Reserve Chair Jerome Powell says it will be up to United States lawmakers whether or not to bring a digital dollar to the market.

Powell said that US central bank must consider the health of other markets when creating a digital currency—and that economic recovery was “far from complete”.

Hours before the time of this publication, Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee on the semiannual monetary policy report.

Committee members questioned Chairman Powell on the impact the pandemic has had on minority groups and women, small businesses, and climate change policy. He reiterated several of the points he made one day earlier before a Senate committee and told lawmakers that recovery was “far from complete” and that it would take several years to reach the Federal Reserve’s inflation goals.

During the hearing, the Fed Chair responded to questions from Rep. Patrick McHenry, who said the digital dollar could create national and economic security issues for the United States. Powell said that while there were many concerns surrounding the project— the Fed intended to reach out to the public and the central bank must consider the health of other markets.

The Federal Reserve Chair said:

“We’re working on the technical challenges and also collaborating and sharing work with the other central banks around the world that are doing this.”

Powell added that the digital dollar initiative would likely have to be approved by United States Congress first:

“We could well need legislative authorization for such a thing. It isn’t clear until we see which way we’re going.”

Powell’s remarks come following his comments at the Senate Banking Committee yesterday, in which he said the Federal Reserve was carefully considering whether the United States should launch a digital dollar. The Fed Chair also said that it was unlikely for stablecoins and digital currencies to affect monetary policy transmission.

The Federal Reserve was also dealing with another technical challenge today, as the majority of its services provided through its online portal were inaccessible to the public for over an hour. At the time of writing, all Federal Reserve Bank Services with the exception of Account Services have resumed and are available online.

The approach to CBDC from the United States has been a huge contrast from the strategy adopted by China, who has been quick to introduce a pilot version of its digital currency electronic payment (DCEP).

With the growing popularity of cryptocurrencies like Bitcoin, central banks worldwide have reacted by experimenting with digital currencies of their own to remain financially relevant. In addition, the issuance of CBDCS by global economies may be an eventuality, as technological innovation is on the rise and the need for digital payments to be conducted efficiently, securely, and quickly is more important now than ever.

Fed Chairman Powell Says Central Bank Digital Currency Would Need to Coexist with Traditional Cash

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Federal Reserve chairman Jerome Powell has said that Central Bank Digital Currencies (CBDCs) like the potential “digital cash” would need to be integrated into existing payment systems alongside cash and other forms of money.

While speaking in a virtual payment conference in Basel, Switzerland, Powell emphasized a point highlighted in a recent report on CBDCs from the Bank for International Settlements (BIS) and a group of seven central banks, including the Federal Reserve. He said:

“Relevant to today’s topic, one of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system.”

The Fed Chair was delivering closing remarks to a conference hosted by the CPMI (Committee on Payments and Market Infrastructures), a group of central bankers from around the globe assembled by the Bank for International Settlements (BIS).

Powell said that the coronavirus pandemic has prompted governments to reflect deeper on how money works currently. He stated: “The COVID crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments. And as this conference amply demonstrates, despite the challenges of this last year, we still have been able to make important progress.”

Powel further said that the Fed Board of Governors is carrying out experiments on CBDCs in collaboration with the teams at the Federal Reserve Bank of Boston and researchers at the prestigious Massachusetts Institute of Technology (MIT).

The Future of Digital Money

Powell’s comments today echo those from European Central Bank (ECB) president Christine Lagarde. Last year September, Lagarde said that the European Central Bank is working on issuing a digital euro, an electronic form of central bank money accessible to all. She confirmed that the digital euro would complement but not replace traditional cash. She further mentioned that the digital euro could ensure sovereign money remains at the core of European payment systems and provide an alternative to private digital currencies.

Lagarde acknowledged that consumer preferences have seen a rise in digital contactless payments, with Europeans embracing online platforms for their retail needs during the pandemic. The ECB is still conducting research on the benefits of CBDCs for retail use and would present feedback to the public later.

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US Fed Aims To Publish Discussion Paper on CBDC This Summer

The United States Federal Reserve appears more committed to changing the payments landscape by using emerging technologies. The US Fed Chairman Jerome Powel said the Central Bank Digital Currency (CBDC) design would “raise important monetary policy and financial stability”.

A video message released by the Fed Chairman, Jerome Powell, said it was made known that the apex banking body has been monitoring the advances in the tech landscape. This is also accompanied by how it shapes the payments ecosystem and the Fed’s response to these developments.

“As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system,” Powell said in the video message. “In pursuit of these core functions, we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking.”

The Fed acknowledged that new technologies provide opportunities for central banks, per the Central Bank Digital Currency (CBDC). The Federal Reserve has commenced research on exploring the upsides of developing and issuing a CBDC. The Fed’s objective is to see if a CBDC can complement existing systems and serve the needs of households and businesses.

“We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis—including input from the public and elected officials.”

The US Federal Reserve said the authority would publish the discussion paper this summer to advance its goals. Powell noted that the paper would seek to “explore the implications of fast-evolving technology for digital payments, with a particular objective, focusing on the possibility of issuing a U.S. central bank digital currency.”

The US may be lagging behind China, entering its advanced retail testing phases for its digital Yuan CBDC project. However, the North American giant is committed to getting the foundation of the Digital Dollars right, seeking further dominance as the world’s major reserve currency.