Federal Reserve Under Oath about Bitcoin
Incredible valuations. Historic price rise. Mass adoption numbers. The Year of Bitcoin has achieved yet another official milestone: it is now a formal policy consideration by regulators of the world’s largest economy.
Tuesday afternoon in Washington, DC, Jay Powell sat before a sparsely attended, mostly pro-forma senate hearing. A current Fed governor nominated by President Obama to serve a 14 year term, Mr. Powell is widely considered to ease through to confirmation in the Republican-controlled upper body.
Georgia Senator, Republican David Alfred Perdue, Jr took asked the nominee a series of questions. Completely switching topics, he ended his line of thought with queries at the 1 hour and 35 minute mark about a subject sweeping professional finance circles: bitcoin.
Senator Perdue began, “We have another bubble that is some 4 to 5 times the size of the dot com bubble in the late 1990s, and that has to do with the cryptocurrencies like bitcoin,” he said.
Junior Georgia Senator Asks about Bitcoin
Mr. Perdue is junior senator from the Peach state, having been elected in 2014 to a six year office. His background include heading many businesses.
“Bitcoin’s market value now is bigger than all but 29 of the S&P 500 corporations in America,” he continued. “Assuming that this continues, and talking about that bubble, and the size and the growth of these cryptocurrencies, if that continues to grow … to what extent does that effect your ability to effect results from your typical monetary policy options that you typically have as a central bank?”
Nominee Powell answered, “You know, in the long, long run things cryptocurrencies of that nature could matter,” he said. When confirmed, Mr. Powell will be the 16th person to assume chairmanship of the Fed in its 103 year history.
“They don’t really matter today,” Mr. Powell said dismissively. “They’re just not big enough. They’re just not anywhere near close to enough in volume for it to matter for us.”
Senator Perdue then again made parallels between the 1990s dot com boom and bitcoin, implying Mr. Powell should see the same.
“There’s no question the valuations have gone up quite a lot in the last year or so. I don’t have a view on the appropriate level of the valuation, of course,” Mr. Powell explained.
The price of bitcoin, as of this writing, has reached 10,000 USD on global exchanges, skyrocketing hundreds of percent in eleven months.
“From our standpoint, cryptocurrencies are something we monitor very carefully. We actually look at blockchain as something that may have significant applications in the wholesale payments part of the economy,” Mr. Powell expanded in his answer.
“It’s something we pay close attention to,” the Board Governor noted.
The Senator from Georgia then asked if the Fed were watching technologies used around the world and in companies such as Alibaba with regard to blockchain and cryptocurrencies.
“We are watching all of those technologies. It’s something we have to do, I think. It’s actually something that is kind of enjoyable and interesting,” Mr. Powell smiled.