Powell Declares Bitcoin a Competitor to Gold, Not the Dollar

Federal Reserve Chairman Jerome Powell has clarified his stance on Bitcoin, calling it a rival to gold rather than a contender for the U.S. dollar. Speaking at the New York Times DealBook Summit 2024, Powell acknowledged Bitcoin’s growing recognition as a “digital gold” and its role in preserving the value of money, but he emphasized its volatility and limited use as a payment system or currency.
Bitcoin: Digital Gold in the Modern Era
Bitcoin, often referred to as "digital gold," has increasingly been viewed as a store of value, akin to precious metals. Powell echoed this sentiment, describing Bitcoin as “virtual gold” rather than a functional currency.
“It’s just like gold, only it’s virtual. People are not using it as a form of payment or as a stable store of value. It’s highly volatile. It’s not a competitor for the dollar; it’s really a competitor for gold,” Powell stated.
His comments align with the broader narrative of Bitcoin as an investment instrument rather than a medium of exchange. While Bitcoin has gained significant traction among retail and institutional investors, its price volatility has made it less viable as a substitute for traditional fiat currencies.
Call for Crypto Industry Regulation
Powell also addressed the rapid growth of the cryptocurrency industry, emphasizing the need for regulatory oversight to ensure safety and consumer protection. Although the Federal Reserve does not directly regulate cryptocurrencies, Powell urged that digital assets, regardless of their type, be subject to adequate supervision to protect consumers.
“The crypto industry must find a position that aligns with the conventional banking system. It must be safe and supervised,” he added.
Powell highlighted the importance of establishing a regulatory framework that balances innovation with stability, ensuring that participants in the crypto market are safeguarded from potential risks.
Powell on Personal Crypto Ownership
During the summit, Powell was asked by journalist Andrew Ross Sorkin if he personally holds any cryptocurrency. The Fed Chair’s response was unequivocal:
“Not at all.”
Powell’s statement reflects the cautious approach many regulators and policymakers take toward digital assets, even as they recognize their potential to transform the financial landscape.
The Trump Administration’s Stance on Bitcoin
The discussion around Bitcoin has taken a political turn following Donald Trump’s re-election as President of the United States. Trump, known for his contentious relationship with Powell during his first term, has adopted a markedly different stance on Bitcoin compared to his previous administration.
In a surprising move, Trump has introduced the Bitcoin Strategic Reserve, positioning the cryptocurrency as a potential solution to the national debt crisis. This initiative, coupled with the support of the Republican Party, underscores a significant shift in the political discourse surrounding Bitcoin.
Senator Cynthia Lummis, a prominent Bitcoin advocate, has introduced the BITCOIN Act to Congress, aiming to establish Bitcoin as a key component of the U.S. financial system. The proposal has garnered widespread support from financial firms, investors, and the broader crypto community, signaling a growing acceptance of digital assets at the highest levels of government.
Bitcoin’s Role in a Changing Financial Landscape
Powell’s remarks come at a pivotal moment for Bitcoin, which recently broke the $100,000 barrier in a historic bull run. The cryptocurrency’s rise as a competitor to gold and its increasing adoption by institutional investors reflect its growing prominence in global markets.
However, Powell’s emphasis on volatility and the need for regulatory oversight highlights the challenges that remain. As the crypto industry matures, finding a balance between innovation and stability will be crucial for its long-term success.
Looking Ahead
The contrasting perspectives of Powell and the Trump administration illustrate the evolving dynamics of Bitcoin’s role in the U.S. economy. While Powell views Bitcoin as an asset competing with gold, Trump’s policies suggest a broader vision for integrating cryptocurrency into national financial strategies.
With initiatives like the Bitcoin Strategic Reserve and the BITCOIN Act gaining traction, the coming years could see Bitcoin play an increasingly significant role in shaping the future of finance. As debates continue, one thing is clear: Bitcoin is no longer on the fringes of the financial world—it is firmly in the spotlight.
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