United States Federal Reserve Chairman Jerome Powell is drawing attention to the risks posed by the ever-growing popular digital currency Bitcoin.

Speaking earlier this week about the ascension of Bitcoin, Powell said: “They’re highly volatile, see Bitcoin, and therefore not really useful as a store of value. They’re more of an asset for speculation. So they’re also not particularly in use as a means of payment… It’s essentially a substitute for gold rather than for the dollar.”

The way the Federal Reserve chair sees it, Bitcoin is more of a crypto asset subject to immense volatility. It’s lack of stability thus makes it replete with risks when the object of a currency is to be dependable, steady, inspiring confidence in its value.

Bitcoin was launched in 2009 and initially was viewed as a transactional alternative for a distant digital future. Its advocates point to its convenience and ease and that it is not dependent on central authority and banks. Then there is the security aspect with the technology that blockchain offers being difficult to be bettered.

During the COVID-19 pandemic, Bitcoin’s value has skyrocketed. Those who invested early in the crypto-currency are laughing all the way to the bank!

More online retailers are accepting Bitcoin and electric car maker Tesla has announced that its vehicles can be purchased using this digital currency. It is a question of belief in a currency and asset and more people are believing in Bitcoin.

Tesla has invested US$1.5 billion in Bitcoin and, after hitting a high of US$62,000 last week, it is picking up again, trading at US$56,500 today. Institutional investors like Morgan Stanley are now getting into Bitcoin.

Powell is not cleaving to the traditional view that the reserve currency which is the dollar is inviolable. He can no doubt see the times are changing with digital currencies staking their claim and continuing to grow in popularity but he draws attention to the risk of cyberattacks and money laundering.

He now has the Federal Reserve looking into the efficacy of  Central Bank Digital  Currencies (CBDC) and what technology can be utilised to make them mainstays.

Powell posed the question: “The real threshold question for us is, does the public want or need a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments-oriented system?”

Closer to home, after quietly exploring the viability of a CBDC for sometime, the Bank of Jamaica (BOJ) took the decision in May 2020 as part of its ongoing retail payments reform, to venture into the digital innovation that is fast becoming a feature of global central banks. A CBDC is expected to be rolled out by the BOJ in early 2022.