Cryptocurrencies took the center stage again during Federal Reserve Chairman Jerome Powell’s second day of testimony before the U.S. Senate. Today, lawmakers expressed their concerns about the threat that bitcoin and other cryptocurrencies pose to the financial system, including the possible challenge of bitcoin replacing the U.S. dollar as the world reserve currency.
Powell: The U.S. Should Not Assume That The Dollar’s Status As A Reserve Currency Would Last Forever
During the second day of Jerome Powell’s testimony, senators reiterated their concern about private corporations, such as Facebook, who with their money and power are now attempting to create their own currency and monetary policy.
Lawmakers also worried that the U.S. was lagging behind other nations on real-time payment methods.
In this connection, Powell indicated that he had not seen bitcoin used as a payment method.
However, he noted, bitcoin is already increasingly taking over gold in the global economy as a store of value.
“It’s a store of value” — Jerome Powell, Chairman of the Federal Reserve talking to the Senate Banking Committee about Bitcoin
THE VIRUS IS SPREADING 🔥
— Pomp 🌪 (@APompliano) July 11, 2019
Lawmakers also mentioned their uneasiness regarding bitcoin’s possible long-term challenge to replace the U.S. dollar as the world reserve currency.
Powell admitted that this was in the realm of possibility, albeit only in the long term. He also emphasized that the U.S. should not assume that the dollar’s status as a reserve currency would last forever.
POWELL: DON'T ASSUME USD STATUS AS RESERVE CURRENCY PERMANENT
— zerohedge (@zerohedge) July 11, 2019
Powell also said that having the dollar as the world reserve currency conveyed both benefits and costs. And he asserted that to replace the U.S. dollar as the world reserve currency, the issuing country would be required to have the rule of law and a highly developed financial system.
Regarding Powell’s position on the need for a global reserve currency, Peter Schiff hastened to point out,
“Powell is wrong. The world does not need another reserve currency to replace the dollar. Gold is a much better reserve asset than any fiat currency. In fact, gold reserves legitimize the currencies they back. The dollar only became the reserve currency due to its gold backing.”
On July 7, 2019, during Powell’s Senate testimony on monetary policy, the value of bitcoin dropped below USD 12,000 after Powell flagged “serious concerns” about Facebook’s planned Libra cryptocurrency. However, bitcoin is already demonstrating its resiliency as it inches back to the USD 12,000 mark.
What are your thoughts about Bitcoin eventually replacing the U.S. dollar as the world reserve currency? Let us know in the comments below!
Images via Creative Commons (Flickr)