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Jerome Powell noted that the coronavirus crisis has accelerated digital payments adoption and innovation.
Speaking during a virtual innovation summit hosted by Bank of International Settlements, Fed Chair Jerome Powell noted that Bitcoin is more a substitute for gold than the dollar. The event that was streamlined through YouTube was titled ‘How Can Central Banks Innovate in the Digital Age’.
“Crypto-assets – we call them ‘crypto assets’ – they’re highly volatile – see Bitcoin – and therefore not really useful as a store of value, and they’re not backed by anything. They’re more of an asset for speculation, so they’re not particularly in use as a means of payment. It’s more a speculative asset. It’s essentially a substitute for gold rather than for the dollar,” Powell noted.
Late last week Powell participated in a conference hosted by the Committee On Payments And Market Infrastructures, Basel, Switzerland. During the conference, Powell said that CBDC needs to coexist with cash and other types of money. In that case, it was presumed that cryptocurrencies are to be included in other types of money.
Powell noted that the coronavirus crisis has accelerated digital payments adoption and innovation. The United States has rolled out several stimulus packages to boost the economy from the devastation of the pandemic. In a bid to roll out the checks seamlessly in the shortest time possible, the Fed resulted in using digital payment besides paper checks.
Jerome Powell: Bitcoin as a Substitute to Gold
Bitcoin and gold have been put head-to-head in the past to compare their store of value capabilities. Notably, both assets have been regarded as a store of value, depending on the situation at hand.
However, Bitcoin has emerged as the best store of value over gold due to its nature. To start with, Bitcoin has a limited supply in comparison to gold has an unlimited supply. Moreover, there is a possibility that gold mining in outer space could flood the gold market in the future.
Another feature that makes Bitcoin an alternative store of value to gold is the fact that it is easier to store and transport huge amounts of Bitcoin than gold. Most importantly, Bitcoin has proved to be a better store of value than gold during the coronavirus pandemic.
Notably, Bitcoin has rallied nearly 10X in the past twelve months while gold has not even done half of that. More companies led by MicroStrategy and Tesla have adopted Bitcoin in their balance sheet to hedge against the deflationary fiat currencies.
Bitcoin remains dependent on the dollar and other fiat currencies to be used in our day-to-day activities. As a result, Bitcoin will have to coexist with the cash system i.e. the dollar and other global currencies.