Fed Chairman Powell says cryptocurrencies present big risks to investors

Yuri Gripas | Reuters

Federal Reserve Board Chairman Jerome Powell reacts at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018

The head of the Federal Reserve raised concerns about cryptocurrencies on Wednesday, saying they present serious risks to investors.

Jerome Powell told members of Congress that “relatively unsophisticated investors see the asset go up in price, and they think: ‘This is great; I’ll buy this.’ In fact, there is no promise of that.”

“There are investor and consumer protection issues as well,” Powell said in front of the House Financial Services Committee. The Fed chairman also said cryptocurrencies are not real currencies because they have no intrinsic value.

Bitcoin, the world’s most popular cryptocurrency, traded 1.5 percent higher at $7,430.01 on Wednesday, according to data from CoinDesk.

Digital currencies have become popular in recent years, with some of the most well-known figures on Wall Street, including Fundstrat’s Tom Lee and value investor Bill Miller, warming up to them. Bitcoin’s price skyrocketed last year and briefly traded above $20,000, before a sharp decline in 2018.

Powell previously commented on crypto last November, when he said that a drop in cryptocurrency assets would not destabilize an economy. He added, however, that “in the long, long run, cryptocurrencies and things of that nature could matter,” adding that blockchain — bitcoin’s underlying technology — could be something that “may have significant applications in the wholesale payments part of the economy.”