During her last press conference as head of the US Federal Reserve System, Janet Yellen indicated she and her colleagues are cautiously eyeballing Bitcoin, the volatile cryptocurrency that’s been capturing headlines globally over the last couple of weeks. And while she acknowledged some other central banks might be considering adopting a cryptocurrency, the Fed is unlikely to follow suit.
“There is a discussion going on among central bankers about the potential merits of … adopting a digital [cryptocurrency] currency. And there might even be a central banker or two around the globe that might go in that direction,” Yellen said. “But I really want to caution that this is not something the Federal Reserve is seriously considering at this stage. While we are looking at research on this topic, there are to my mind limited benefits from introducing it, a limited need for it, and some substantial concerns. So I would really doubt that the Federal Reserve would soon go in that direction.”
The Fed chief stated she sees only a limited risk to the financial system from crypto. “Often, risks threatening financial stability arise when there is exposure of the banking system to fluctuating asset valuations,” she explained, “and I really don’t see any significant exposure of our core financial institutions to threats from Bitcoin.”
Yellen also noted the cryptocurrency plays a very small role in the payment system. “It is not a stable store of value, and it doesn’t constitute legal tender. It is a highly speculative asset,” she said. Further, the Fed doesn’t play any regulatory role related to Bitcoin, “other than assuring that banking organizations that we supervise are attentive [to] appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering, Bank Secrecy Act responsibilities that they have,” she added.