Bitcoin is off around 2% to trade below $11,800 after yesterday’s comments from Federal Reserve Chair Jerome Powell.
Speaking to the House Financial Services Committee, Powell stated that:
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability. These are concerns that should be thoroughly and publicly addressed.”
That’s the opposite of what the market wanted to hear. Traders were betting that Libra would work to allay institutional fears surrounding cryptocurrency. It is intended to be a stable cryptocurrency (tethered to a basket of fiat currency), overseen by a not-for-profit, and governed by a panel of industry big names including finance giants like MasterCard, Visa, and PayPal.
It seems that central bankers don’t see that this makes much of a difference.
Criminality has always been one of the banes of cryptocurrency. The anonymous nature of transactions makes it useful for money laundering. On top of that, because crypto is usually stored in virtual wallets or on cryptocurrency exchanges, it is a prime target for hackers. The world’s biggest crypto exchanges have lost millions in Bitcoin and its peers over the past few months.
While many in the cryptocurrency community have claimed Libra isn’t a real crypto, parallels were always going to be drawn between the two. Libra could have opened doors for Bitcoin and the like, instead it could bring the regulators down upon digital currencies.
Powell has called for the project to be paused until regulators are satisfied that their main concerns have been addressed. Regulators have long-circled the cryptocurrency market, and the threat of action has been a key drag on crypto prices.
Libra could have sped up the process. There’s a chance this might work out for the best – regulation was always going to come, so maybe tackling the issue headlong could remove a barrier to the mainstream for BTC and its fellow altcoins.
But the fact remains that Powell’s attitude towards Libra is a fundamental punch to the speculative rally Bitcoin is currently undergoing. Adoption looks to be a long way off, and opposition to Libra means the best chance the crypto market has of mass adoption has already stumbled.
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