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Powell: Fed is evaluating launch of digital currency

CoinDesk Learn Editor Ollie Leech joins Yahoo Finance to discuss the Federal Reserve Chairman Jerome Powell's comments on digital currency and if NFL star Tom Brady should be taking his salary in cryptocurrency.

Video transcript

SEANA SMITH: Bitcoin gaining a bit today, up just around 2.5%. We want to turn our attention, though, to the comments that we just got out a few minutes ago from Fed chair, Jay Powell. He was asked about the Fed's feature in digital currency, and he was saying that the bank is pushing ahead into its study into whether to implement its own digital currency, and that it will be issuing a paper on that shortly. And we want to bring in Ollie Leech. He's CoinDesk's learn editor, talk a little bit more about this.

And Ollie, I guess, what did you make of Fed chair Jay Powell's comments? Because he said he didn't think the US is behind, and he thinks it's more important to do this right than to do this quickly.

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OLLIE LEECH: Yeah, and I think he's completely right to say that. It was like Adam said before, it's kind of like porridge without the brown sugar. It was them neither sort of committing to it, or saying that they weren't interested in it. And like you said, you know, the United States dollar is the world's reserve currency. It's not something they can rush. There's a lot of uncertainties in the regulatory space, but also in the technology itself.

But then, you know, to the report's comment, you know, they are getting a little bit behind. If you at, you know, you look at the broader spectrum where every other country is at, there's over 80 countries exploring central bank digital currencies at the moment. The Bahamas were the first to launch theirs, I believe, and that was in May of last year. Sweden, two weeks ago, just launched theirs.

And, you know, you've got Nigeria, Ghana, those guys are weeks away from launching theirs. And I think China now has over 140 million users on its digital yuan app, although it hasn't officially launched its CBDC yet. There is this kind of argument about, you know, getting it right and also getting it there. And yeah, it'll be really interesting what it said in this discussion paper.

ADAM SHAPIRO: We hope they get it right. There's something else that-- I don't know if this is the right call, far be it from me to, you know, challenge the greatest of all time, but Tom Brady says he'd be willing to take his salary in cryptocurrency? I-- I'm not sure that's a great idea. What do you think?

OLLIE LEECH: I mean, yeah. I mean, you know, I'm not an NFL fan but, you know, I like Tom Brady, as a consensus. But I think, you know, anyone who's made over a quarter of $1 billion dollars in their NFL career can afford to take a, you know, a sort of risk with their money. And, you know, he's expected to make something like $40 million this year alone. So yeah, you know, sure, why not? I think the guy's just trying to have a bit of fun with his money.

Do I think this is kind of suitable for the average, you know, man or woman on the street to do? No, I really don't. I mean, it's, you know, it's-- it's the golden rule of investing, right, is only invest what you can afford to lose. And going all in like Tom Brady, it's just too risky. It's fundamentally gambling for-- for average people.

And, you know, especially something like cryptocurrency is so volatile. We're looking at it right now, you know, we've just seen everything crash double digits in the last week alone. You know, diversification is important, trade allocation is important. These things are really important. And following in the footsteps of some guy who-- who makes a very comfortable living, is probably not a good idea. But, good for him. It makes total sense for someone in his position.

SEANA SMITH: Something I could add to this volatility, and a big reason why you probably don't want to put all of your money into cryptocurrency right now, is because of some of the regulation that we could see play out over the next couple of months and over the next couple of years. We got some comments from SEC chair Gary Gensler earlier this week. He made the comment that stablecoins are poker chips. I guess, how is the crypto world looking at this, and what does this potentially mean for crypto investors?

OLLIE LEECH: There's a lot of-- yeah, a lot of interesting regulations coming out at the moment. I mean, for me, like, the one I really find interesting was the Biden administration going after, you know, crypto ransomware attacks. And targeting exchanges is something that's, you know, quite interesting. And interestingly, a day later from that, we saw the first exchange.

SUEX is owned by a Russian person, has now been sanctioned by them for facilitating ransomware payments. It's all moving at a very fast pace. We've already seen-- Binance is now facing, you know, potential insider trading charges from the CFTC along with its probe from the Department of Justice, the IRS. It's-- yeah, it's really, really interesting.

And with Gensler, everyone was kind of a bit upset, I think, that everyone was hoping that he would be far more pro crypto. And to say that stablecoins are like poker chips, I mean, it's not really living up to what we all hoped it would be. But yeah, it's-- it's interesting, despite that. I don't know-- I don't know where-- where this is going to go with ETFs and things like that, but it's not looking good for stablecoins at the moment.

ADAM SHAPIRO: Turning our attention back to the headline at the beginning of the week regarding Evergrande-- I heard one reporter say "Ever Grandé," but I think "Ever Grand"-- and crypto, what the Chinese government has done stepping in and assisting, they're going to make the interest payment, hopefully they'll make the next interest payment. Does this remove the questions about whether cryptocurrencies that got dragged down because of Evergrande no longer need to fear, or is that still a precarious place to be?

OLLIE LEECH: Yeah, I think that's the kind of main theory at the moment of why Bitcoin crashed in the way that it did. I mean, it's kind of sort of tiered. You know, there was concerns, you know, institutional investors wanted to offload their riskier assets in the event that it, you know, "Ever Grandé" or "Ever Grand" did default on their-- on their debt. And then obviously that, in turn, would cause, you know, panic throughout the wider financial market.

So offloading cryptocurrency could have happened ahead of this-- this payment that they've now made. That could have then triggered, you know, a lot of liquidations, particularly people-- you know, retail, over leveraged, highly leveraged positions, they would have had to then cancel, you know, liquidate those. That would cause more pressure to the downside.

And then, that can just kind of-- we've seen it time and time again with events triggering sort of institutional buyers to cash out. That triggers liquidations, and we just see this cascading down. Interesting is also another thing as well-- we saw a substantial error on the Pyth network. It's an Solana based Oracle service, and basically two of its data points came in and said that Bitcoin's price was near zero. It threw off its average.

And so what it did is, it delivered-- Pyth network had this figure of $5,000 as Bitcoin's price, caused additional unnecessary liquidations. So I mean, that could have all played into it as well. And obviously, this Binance insider trading thing would add to it as well. And the, you know, and the Biden administration talking about crypto ransomware, it's all coming together at the moment and painting a bit of a negative picture across the whole market. It's not just Bitcoin right now, we're seeing Ethereum as well, and the rest of the market take a dip as well.

SEANA SMITH: Ollie Leech, always great to speak with you, CoinDesk's learn editor. We'll talk with you again soon.