Surveys show that roughly 16% of adult
Americans — or 40 million people — have
invested in cryptocurrencies. And 43%
of men age 18-29 have put their money
into cryptocurrency.
The Fed is also trying to figure out how digital
assets like Bitcoin might impact financial
markets, particularly during downturns or
market crashes.
“We don’t know how some digital products will
behave in times of market stress, which could
lead to large destabilizing flows, nor do we know
how stresses in crypto markets could potentially
spill over into the traditional financial system,”
Powell said.
One concern regarding stablecoins is that, while
many promise to maintain a value of $1, it’s not
always clear if stablecoin issuers have sufficient
cash to redeem each stablecoin they issue for $1.
Powell also noted that crypto assets have
been used for “illicit activity,” such as money
laundering, and “we need to prevent this so that
the innovations that do survive and do attract
broad adoption are those that provide value
over time” for legal uses.
Powell said the Fed has “long supported
responsible innovation,” though he added
that it is difficult to tell which innovations “will
have lasting effects and those that will turn out
mostly to be hype.”
“And it’s never possible in real time to be sure
which is which,” he said.