The lure of Bitcoins is such that many believe Bitcoin would create the world's first Trillionaire. Bitcoin has already left major currencies and precious metals in the dust by exhilarating leaps and bounds. Come and join the ride but please don't forget to wear seat belts!
By C. Edward Kelso - October 31, 2017 (news.bitcoin.com)
The New York Times is reporting President Trump will appoint “Jerome H. Powell as the next chairman of the Federal Reserve (Fed).” Bitcoiners all over the world will be impacted.
Potential Trump Nominee Powell is Cautious about Bitcoin
President Trump is widely expected to nominate Federal Reserve Board of Governors member, Jerome H. Powell, for Senate confirmation as the next chair of the Federal Reserve. The potential Fed chair has previously stated what he sees as a tension with bitcoin as the Fed “could face difficult trade-offs between strengthening security and enabling illegal activity.”
Mr. Powell has held a Fed governor’s seat since 2012, and is currently at the relative beginning of a term that would have kept him installed until 2028.
Governor Powell appears familiar with bitcoin as a currency and Bitcoin as a network.
Current Fed chair is bitcoin photo-bombed while testifying.
This spring, he gave a talk titled Innovation, Technology, and the Payments System for the Yale Law School Center for the Study of Corporate Law, during nearly half of which he spent discussing “distributed ledger technologies” (DLT) and “digital currencies.”
“Bitcoin helped bring [DLT] to public attention,” the governor began. “Using blockchain technology – which employs a form of DLT – and an open architecture, Bitcoin allows for the transfer of value (bitcoins) between participants connected to its ecosystem without reliance on banks or other trusted intermediaries,” he outlined.
Is the Fed and its Banking System Obsolete?
Mr. Powell continued, “This feature has led some to predict that DLT will, in the long run, render parts of the banking and payments system obsolete, as the intermediation of funds through the banking system will become unnecessary.”
After detailing a few of last year’s institutional experiments with bitcoin, his remarks then turned to lessons taught by the world’s most popular cryptocurrency.
“First, in contrast to Bitcoin’s open architecture, work by the financial industry has focused on the development of ‘permissioned’ systems, which establish criteria to determine who is permitted access to particular systems, ledgers, functions, or information,” he noticed.
“Some argue that in certain markets, faster and more predictable processing will also reduce the capital and liquidity costs of operations,” the governor said. However, “technical issues remain,” such as “reliability, scalability, and security remain very important. Beyond these issues, standardization and interoperability across different versions of DLT will need to be addressed to allow technology integration and avoid market fragmentation,” Mr. Powell explained.
Appealing to his law school audience, he stressed the “need [for] a thorough analysis of how DLT fits into current legal frameworks and what gaps need to be filled by contractual agreements or new laws and regulations [emphasis added].”
Lastly, Governor Powell discussed a possible future state-backed digital currency.
“Advanced cryptography could reduce vulnerability to cyber attacks,” he insisted, “but make it easier to hide illegal activity. To the extent we relax strong cryptography to make it easier for authorities to monitor illegal activity, we could simultaneously weaken security.”
The governor wasn’t all negative, concluding that we “live in a time of extraordinary technological change. We should be open to the new ideas and innovations that will drive economic growth and improvements in our financial system,” he said.
Images courtesy of Pixabay, The Bipartisan Policy Center, Cspan.
C. Edward Kelso is a long-time fintech journalist, passionately covering the cryptocurrency space since 2014.
“Bitcoin is an attempt to replace fiat currency and evade regulation and government intervention. I don’t think that’s going to be a success.”
He attributed the current run up in price of Bitcoin to its speculative nature and felt that Bitcoin hasn't proven itself as a transactional currency. In his opinion the government will eventually step in to prevent Bitcoin from rivalling fiat currency.
Blockchain, not Bitcoin
While dismissing the possibility of Bitcoin becoming a successful alternative to fiat currency, Bernanke was all praise for the Blockchain. As reported by Fortune, Bernanke said:
"The Fed, the Bank of England, and Japan are very supportive of these technologies because they’ll improve payment systems."
Ben Bernanke's views on Bitcoin have changed over the years. In 2013, during a Senate Committee hearing, he called virtual currencies 'innovative payment systems' and said that the Fed had no plan to regulate them. In 2015, he said that Bitcoin's volatility and anonymous nature were serious problems. The market however, seems to be ignoring Bernanke and Dimon's views on Bitcoin and pushing it to scale ever higher peaks.