WASHINGTON, May 20 (Reuters) - Federal Reserve Chair Jerome
Powell flagged the risks of cryptocurrencies in an unusual video
message on Thursday that also laid out a clearer timetable for
the Fed to consider adopting a digital currency of its own.
Highlighting the fast advances in financial technology and
the potential benefits involved, Powell said that
cryptocurrencies, stablecoins and other innovations "may also
carry potential risks to those users and to the broader
As that technology advances, "so must our attention to the
appropriate regulatory and oversight framework. This includes
paying attention to private-sector payments innovators who are
currently not within the traditional regulatory arrangements
applied to banks, investment firms, and other financial
Powell said the Fed would release a discussion paper this
summer "outlining our current thinking on digital payments, with
a particular focus on the benefits and risks associated" with
establishing a central bank digital currency. The Fed will ask
for public comment as part of the process.
Powell said the Fed wanted to be sure any central bank
digital currency provided benefits to consumers and businesses,
and noted that "to date, cryptocurrencies have not served as a
convenient way to make payments, given, among other factors,
their swings in value."
Powell's statement came just hours after the U.S. Treasury
proposed new regulations on the use of bitcoin. Released through
video on the Fed's website, it came amid a volatile week in
which cryptocurrency values plunged, and the role of
cryptocurrency in ransomware payments was highlighted in the
shutdown of a major U.S. gas pipeline.
The Boston Fed is currently working with the Massachusetts
Institute of Technology to research the technology that could be
used for a central bank digital currency and will be releasing
those findings in the third quarter. Powell and other Fed
officials however have said they intend to move deliberately to
ensure that the benefits outweigh any risks involved.
(Reporting by Howard Schneider; Editing by Andrea Ricci)