Talking Points:
- Jerome Powell Chairman of the Federal Reserve said that the U.S. must to get a central bank digital currency (CBDC) right rather than being the first to launch one.
- The U.S. dollar’s standing as the worlds reserve currency makes the Fed worry about CBDCs.
- Bitcoin saw some upward momentum following Powell’s announcement on Monday.
Bitcoin was able to break out of the 11,500 USD zone and is closing in on 12,000 USD following Federal Reserve Chair Jerome Powell comments about the idea of a CBDC in the U.S.
In Monday’s trading session Bitcoin climbed from 11,519 to 11,837 USD before finishing the session at 11,764 USD, which helped the major cryptocurrency break the pattern of moving in conjunction with the U.S. stock market. As we saw the S&P 500 drop following the latest announcements of a new government spending bill.
With this new price sentiment, Bitcoin has moved within touching distance of the 12,000 USD resistance mark, a crucial level that experts believe might see Bitcoin reach new yearly highs if it is able to break through and maintain momentum.
On Monday the International Monetary Fund (IMF) hosted a virtual meeting focusing on cross-border payments, Mr Powell said that the Fed is assessing the cost and benefits of creating a CBDC. However, they haven’t made a final decision whether or not to launch a U.S. CBDC.
CBDC is a type of digital currency that is directly backed by a central bank reserve rather than a reserve from a bank account. Cryptocurrency analysts believe that the IMF meeting and Mr Powell’s comments helped support Bitcoin’s movement yesterday.
Mr Powell said that the topic of CBDCs is one where it is more important for the U.S. to get it right rather than being the first to launch one.
He said, “Getting it right means we not only look at potential benefits of a CBDC but also the potential risks.”
The meeting also had the general manager of the Bank of International Settlements (BIS) Agustin Carstens in attendance, the central bank of all central banks, he advised which countries are falling behind and which are leading the way in regards to the development of CBDCs.
The chairman said that the Fed must be wary when developing the CBDC due to the fact that the U.S. dollar is also a world reserve currency, used globally by several central banks and foreign companies.
