The president of the US Federal Reserve said that a cryptocurrency system adopted on a global scale could eliminate the need for reserve currencies.
During his testimony before the Senate Banking Committee on July 11, Fed Chairman Jerome Powell presented his analysis to determine whether a cryptocurrency system with a global prevalence could diminish, or even go as far as remove the need for so-called anchor coins.
With the de facto US dollar, the dominant reserve currency in the world, Powell has recognized the possibility of a pre-eminent crypto-currency redrawing the current financial landscape – while noting that to date, this is not still become a reality. The president of the Fed said:
"I think things like that [the obsolescence of today’s reserve currencies] are possible but we really […] widespread adoption. Bitcoin is a good example, hardly anyone uses it to pay […] it is a speculative reserve of value like gold. "
Powell's comparison is remarkable given the role of the depository of gold held by entities such as US and foreign governments, other central banks and official international organizations, with the Federal Reserve of New York.
Powell acknowledged that the prospect of crypto-currencies to replace reserve currencies has been implicit since its inception and that its realization could profoundly transform the global financial system – and more specifically the Federal Reserve system. He noted:
"People have been talking about it since the emergence of cryptocurrencies, but we have not seen it. That does not mean that we will not do it – and if we do, then we could witness a return to an era in the United States where we had a lot of different currencies, in the era of the so-called National Bank. "
As noted, Powell testified before the House's Financial Services Committee earlier this week and acknowledged that the impact of the upcoming law on Facebook could be "systemic" for the global financial and regulatory landscape.
In China, veterans of the central bank have described the generalized anticipation of Libya as "inseparable from the global trend towards dollarization," and stressed that Beijing must take prudent measures and conduct rigorous research in an attempt to maintain a strong monetary status.