By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) – Federal Reserve Chairman Jerome Powell pointed out the risks of cryptocurrencies in an unusual video message on Thursday, which also set a clearer timetable for the central bank to consider adopting a digital currency of its own.
Highlighting the rapid advancements in financial technology and the potential benefits involved, Powell said that cryptocurrencies, stablecoins and other innovations “can also carry potential risks for those users and for the financial system in general.”
As that technology advances, “so does our attention to the appropriate regulatory and supervisory framework. This includes paying attention to private sector payments innovators that currently do not fall within the traditional regulatory provisions applied to banks, companies, investment and other financial intermediaries “.
Powell said the Fed would release a discussion paper this summer “detailing our current thinking on digital payments, with a particular focus on the benefits and risks associated” with the establishment of a central bank digital currency. The Fed will request public comment as part of the process.
He also stated that the Fed wanted to ensure that any central bank digital currency would provide benefits to consumers and businesses, noting that “to date, cryptocurrencies have not served as a convenient way to make payments, due to, among other factors, to its variations in value “
Powell’s statement came just hours after the Treasury Department proposed new regulations on the use of bitcoin.
Released in a video on the Fed’s website, it came in the middle of a week in which cryptocurrency values plummeted, highlighting the role of digital currencies in ransomware payments at the close of a major country’s gas pipeline.
The Boston Fed is currently working with the Massachusetts Institute of Technology to research technology that could be used for a central bank’s digital currency and will publish those findings in the third quarter. However, Powell and other Fed officials have said they intend to act deliberately to ensure that the benefits outweigh the risks involved.
(Reporting by Howard Schneider, Edited in Spanish by Manuel Farías)