Federal Reserve chair Janet Yellen has spoken out against bitcoin, arguing that it’s a ‘highly speculative asset’ that isn’t a stable source of value.
Yellen made her comments about the digital currency during her final press conference this week, whose term in office expires in February, reported CNBC. When answering questions regarding the cryptocurrency, she said:
Bitcoin at this time plays a very small role in the payment system. It is not a stable source of value and it does not constitute legal tender. It is a highly speculative asset.
Many others have also called bitcoin a speculative asset. Stephan Roach, a Yale University senior fellow and the former Asia chairman and chief economist at Morgan Stanley, argued earlier this month that the digital currency was a ‘dangerous speculative bubble,’ claiming that it will eventually burst.
Despite the demand that the cryptocurrency is generating, it’s easy to see why there are plenty of naysayers against it. At the beginning of the year, bitcoin was trading at $1,000; however, fast-forward to December and it is now trading at $17,900, according to CoinMarketCap. Such a surge in value now puts its market cap up to an impressive $300 billion.
Since Yellen’s time as the Fed’s chair she has spoken little about the cryptocurrency market. In 2014, she mentioned that the Fed didn’t have the authority to regulate bitcoin, a point which was repeated again during the press conference.
The Fed doesn’t really play any regulatory role with respect to bitcoin, other than assuring that banking organizations that we do supervise are attentive, that they are appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering, bank secrecy act responsibilities that they have.
Compared to other authorities, such as the People’s Bank of China (PBoC), which has taken a strict stance regarding the digital currency market, the Fed has largely taken a hands-off approach. Instead, it appears to be primarily focused on researching the technology behind it. So much so, that Yellen said that the Fed wasn’t seriously thinking about issuing its own digital currency at the moment, adding that:
While we’re looking at research on this topic, there are, I think to my mind, limited benefits from introducing it, a limited need for it and some substantial concerns.