During testimony at the Financial Services Committee on Tuesday 11 February, Jerome Powell, Federal Reserve Chairman countered various questions on a number of issues including the digital currencies and the progress of digital Dollar. Fed. Chair Powell addressed US’s Response to China's Yuan, FB’s Libra, Bitcoin high, and Public Payments Ledger in the testimony session.

The hearing, which was about “Monetary Policy and the State of the Economy,” had been chaired by Rep.  Maxine Waters. Chairman Powell was testified by Illinois Representative Bill Foster.

When asked about the development of digital Dollar, Chairman Powell said:

"Every major central bank is currently taking a deep look,” We feel that's our obligation, technology has now made that possible. I think it's very much incumbent on us and other central banks to understand the costs and benefits and tradeoffs associated with a possible digital currency."

Owing to his update of the development of the digital dollar, Bitcoin price escalated by 5% reaching $10,300 on Wednesday. Bitcoin even reached 10,400 at one point on Wednesday, which is a 44% hike from the beginning of this year. It is reaching new highs due to high demand and low supply. And also due to the upcoming halving event in May 2020 which would cut 50 % of Bitcoin’s supply to the miners.

Due to the panic spread due to the outbreak of coronavirus, a growing number of investors are investing in cryptocurrencies rather than conventional assets.

Other Cryptocurrencies also experienced a surge in price. Ethereum rose to $255 i.e. 15% rise, Bitcoin Cash surged at $473 i.e. 6% rise, Litecoin went up to 6% trading at $79.

A bullish market trend has been witnessed in the last week with rising prices of top cryptocurrencies as well as small cryptos making significant gains in the markets and the Cryptoconomy has reached the threshold of $300 Billion on Wednesday 12 February.

Libra is the Alarming call for the US Government

While answering to the opening speech of Rep. Maxine Waters in which Waters had urged Powell to keep a watchful eye towards Facebook and its digital currency Libra project, Powell acknowledged that the Libra digital currency project was a wake-up call for the Federation and further he provided the progress update of the Fed’s exploration of digital dollar.

On Monday, in another significant development happened during the release of the Budget of the U.S.The Budget proposes to allocate more authority to the Treasury over crypto-assets and requested funding from FinCEN to combat the security threats including cryptocurrencies. 

Jayashree Ingle

CBW - External Analyst

INDIA