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Powell: Stablecoins can be useful if properly regulated

Ben Schiller, CoinDesk Managing Editor, joins Yahoo Finance Live to discuss Federal Reserve Chair Jerome Powell's message on stablecoins and speculative assets.

Video Transcript


- Stocks are trading higher in the wake of the Federal Reserve's final monetary policy statement and press conference of the year. And taking a look at cryptocurrencies in the wake of this Fed decision, those are also moving higher. Bitcoin is up about 4% this afternoon, trading just above that 49,000 mark. And for more on the cryptocurrency price action, we're welcoming in Ben Schiller, CoinDesk managing editor. Ben, thank you so much for joining us.

During the press conference this afternoon, Fed Chair Jerome Powell made a distinction between stablecoins and the kind of cryptocurrencies that many traders have been using to speculate. And focusing on that latter point, Powell said that cryptocurrencies can be risky, but he doesn't see them as a danger to financial stability at this point. Let's take a listen to what he had to say.

JEROME POWELL: I don't see them as a financial stability concern at the moment. I do think they are risky. They're not backed by anything. And I think there's big consumer issues for consumers who may or may not understand what they're getting. And there are certainly developments in the markets that are worth following, which are really not in our jurisdiction. But things like the kind of leverage that that's built into, and those sorts of things, is certainly worth watching.

- Ben what do you make of these comments and Fed Chair Jerome Powell assessment of the risks in this space?

BEN SCHILLER: Well, it seems to be saying it's not a systemic issue for the Fed, that it's more of an issue for the SEC or for other regulatory agencies. And I think there's definitely moves afoot in Congress to come down hard on stablecoins. Next year there are various committees that are addressing that. So I think we can expect to see some action there next year, but maybe it's just not a Fed issue. It's not a thing for Powell to worry about.

- Shifting slightly to something more specific. If you look at Bitcoin, it's down compared to its peak not too long ago. But up today, and it doesn't stop trading. And the trajectory if you go back 12 years is always up. For crypto investors who have the stomach for Bitcoin, what do you think holds in store? We know that the World Central banks are looking at some kind of regulatory crackdown. So what do you think is coming at us in the next six months?

BEN SCHILLER: Well, I think you can look at this in different ways. In one way, Bitcoin is a classic risk asset, and you would expect it to fall in a tighter monetary environment. On the other hand, traders have clearly been pricing this announcement in. And the reason why the price has been going up today is because, perhaps, the ratcheting back of monetary policy is not as bad as they feared.

On the other hand, you could say that Bitcoin is exist-- The whole point of Bitcoin is to exist outside of the traditional financial system, and outside of whatever the Fed is doing. So you could say it's an anti-inflationary asset. So when inflation is increasing, then people would be buying into it. So I think you can look at it in different ways.

- Well, and Ben, just taking a look at the path forward for monetary policy here. The median on the Fed's this afternoon charted out potentially three interest rate hikes next year. How should cryptocurrency investors, and Bitcoin investors specifically, then be thinking about the volatility that could be coming to their portfolio in the next 12 months?

BEN SCHILLER: Well, I don't know. I'm not a trader. But I would think that traders will be watching that very closely, and I think they would need to be reacting accordingly. We can expect to see a lot of volatility next year in the markets generally, and especially in Bitcoin. That might be good for some traders who are used to trading on the short term movements. On the other hand, those long term investors are going to have a different way of dealing with it, I think

- All right, we'll leave it there for now. Ben Schiller, CoinDesk managing editor, thank you so much for your time.