According to the Federal Reserve Governor, Lael Brainard, the central bank is examining the intense volatility of cryptocurrencies, especially Bitcoin, however, she doesn’t think that virtual currencies stance a present threat to financial stability of US.
These remarks were made by Brainard on 3rd April, during a speech at Stern School of Business in New York. She alerted investors to be careful about speculative asset classes, like; cryptocurrencies.
“One area that the Federal Reserve is monitoring is the extreme volatility evidenced by some cryptocurrencies…. For instance, Bitcoin rose over 1,000 percent in 2017 and has fallen sharply in recent months. These markets may raise important investor and consumer protection issues, and some appear especially vulnerable to money-laundering concerns.”
“As in other highly speculative markets, individual investors should be careful to understand the possible pitfalls of these investments and the potential for losses. But it is less clear how the valuations of cryptocurrencies currently could pose a threat to financial stability. Nonetheless, we will continue to study them,” Brainard continued.
According to Brainard, the perils related to the banking sector and traditional asset classes like bonds and stocks are balanced by the past standards due to the modifications that were introduced after the financial crisis of 2008.
She also said:
“Credit growth is robust, and banks are registering strong profitability relative to their international peers.”
Jerome Powell Views
The opinion of Lael Brainard on cryptocurrencies resounded the thoughts of Jerome Powell, who is the Federal Reserve chairman.
In November 2017, Powell said:
“I have nothing against bitcoin… We generally look at some of the risks of cryptocurrencies associated with money-laundering and those sorts of issues, but we’re not broadly opposed or supportive of alternative currencies.”
Latest comments from the Federal Reserve follow the price swings of bitcoin and other digital currencies, that sustained momentum for few weeks. However, during the past four weeks, the price of bitcoin plunged more than a few times.
Although these inconsistent fluctuations in the price of Bitcoin have scared some investors, cryptocurrency “preachers” still remain bullish, as they say, that the recent slump in the market is momentary, and only the result of “sharp regulatory scrutiny” in major markets such as South Korea.
The Former COO of Skype, Michael Jackson said:
“Regulators seem open-minded and are now working to eliminate the risks for consumers…. So, I see no reason why bitcoin shouldn’t fulfil its dream. And if it does, then recent price falls will appear trivial.”
Jackson earlier said that the price of bitcoin could shoot up to $1 million, as he believes that its value as a payment method is irrefutable.