The Federal Reserve chair Jerome Powell takes a major dig at the crypto ecosystem. Speaking at an event organized by Banque de France, the central bank of France, Powell states that there are very significant structural transparency issues around DeFi.
The event “Which role for central banks?” organized by the Bank of France discusses the tokenization of finance and the role of the central banks in it. Jerome Powell, the chairman of the Federal Reserve, and Christine Lagarde, the president of the World Bank attended the event.
According to Powell, there is a real need to regulate cryptocurrencies.
Powell’s Opinion On Crypto
Fed chair Powell has a stark warning for the DeFi ecosystem. He believes that the financial normalization process through interest rates hike has exposed the flaws in DeFi. Crypto assets ballooned during the pandemic when the Federal Reserve engaged in quantitative easing. However, as the Fed engages in restrictive monetary policy, the crypto market experienced a deep selloff.
Powell also expressed the importance of a Central Bank Digital Currency. European Central Bank President Christine Lagarde also believes that CBDCs will allow central banks to remain an anchor in the era of cryptocurrencies.
The idea of a Central Bank Digital Currency is extremely controversial. Layah Heilpern, the author of Undressing Bitcoin, calls it an unethical form of money. She believes that since CBDCs are programmable money, they can be misused by the central banks.
CBDCs are also a heated issue within the Federal Reserve. Neel Kashkari of Minnesota Fed reveals that he sees no use cases for CBDCs in the US. Kashkari believes that CBDCs can be used as tools for mass surveillance.
Crypto Reacts to Powell
The crypto ecosystem is not happy with Jerome Powell’s comments. Powell commented that the central bank will always be the main source of trust behind money. Since this idea is completely antithetical to Satoshi Nakamoto’s vision, the crypto ecosystem is not happy with those comments.
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