Will people abandon central banks in favor of crypto? A famous billionaire and the head of FED seem to disagree

American billionaire and Duquesne Capital founder Stanley Freeman Druckenmiller predicted a bright future for cryptocurrencies at the CNBC summit in New York amid recession forecasts. In his view, if central banks lose people’s confidence, digital assets have a good chance of surviving a “renaissance” and taking over the market. In turn, the chairman of the Federal Reserve (FED), Jerome Powell, believes otherwise and is sure that central banks will always be the source of confidence in money. 

Why people need crypto?

The businessman’s forecast is based on the information that the Bank of England is buying British bonds of 65 million pounds sterling. In his opinion, other financial institutions may do the same in the next three years. If everything goes according to the worst-case scenario, people will stop trusting banks and switch to cryptocurrencies, which play a significant role in their renaissance. 

It is incredibly unusual to hear this from someone who is not a holder of digital assets. According to the billionaire, focusing on the U.S. economy, the FED is taking significant risks. 

 “We’re taking this massive gamble where you threaten 40 years of credibility with inflation, and you’re blowing up the wildest raging asset bubble I’ve ever seen. The Fed was wrong. They made a big mistake”, — he said. 

Specifically, he was referring to the FED raising inflation by 30 basis points from 1.7 to 2, which was risky, and they lost. But the poor people suffered the most, ravaged by inflation. 

As for the recession, according to Druckenmiller, it will come in 2023. 

Will central banks always be a source of confidence in money? 

The FED Chairman Jerome Powell disagrees with Druckenmiller’s opinion and is confident that central banks were, are, and will be a source of confidence in money. The expert said this at a conference on the possibilities and problems of tokenization and finance in Paris. 

In particular, Powell stated that stablecoins could increase finance efficiency, but such actions are often superficial because they ignore risk or do not provide the right collateral. The critical question is whether there should be more use of stablecoins outside of crypto platforms and, if so, how to regulate their use. In answering this question, the expert said that central banks are and always will be the primary source of confidence in the money market.

Powell pointed out that stablecoins have a free trust in the currency to which they are pegged, backed by the underlying issuer. Therefore, the primary regulator will be the FED if these cryptocurrencies are introduced into circulation. 

Also, during his speech, Powell reminded us that the FED’s work on interaction with cryptocurrencies is not over, and it is currently being decided whether to issue a digital dollar. However, it is worth noting that the resolution of this issue also requires approval from Congress and the executive branch, so the verdict will probably not be given soon.

Earlier, analysts at the Bitcoin Policy Institute called on U.S. authorities to abandon the development of the state cryptocurrency (or Central Bank Digital Currency, CBDC) in favor of Stablecoin and Bitcoin. Read the details of the statement here.