The global financial arena recently witnessed important statements from Mary Daly, President of the Federal Reserve Bank of San Francisco, regarding cryptocurrencies and gold. Daly confirmed that cryptocurrencies are not the same as gold, although there are some common characteristics between them at times.
Daly made her statements during an interview with Yahoo Finance, where she stressed the need to understand cryptocurrencies accurately. She stated that people must abandon the widespread misconceptions about cryptocurrencies and accurately define what they are. She explained, saying: “We have to understand cryptocurrencies more deeply, and then call them by their real name after making sure of what they are, whether it is a currency, a medium of exchange.”
Cryptocurrencies are not real currencies
Daly’s statements went on to clarify that cryptocurrencies should be treated as an independent asset class. She stressed that confusing them with gold, as is currently happening in the markets, is not accurate. Although there are similarities between cryptocurrencies and gold in some aspects, Daly stressed that she does not consider cryptocurrencies to be real currencies.
Daly continued her explanation that for cryptocurrencies to become a real currency, they must have the ability to grow with the expansion of the economy. She stated that the value of the currency must rise not only due to increased demand but also through a direct link to the performance of the economy. For example, the value of the US dollar closely correlates with the economic performance of the United States compared to other countries.
The position of the US Federal Reserve and the opinion of Jerome Powell
Daly’s statements were distinct from the opinion of the Chairman of the Federal Reserve, Jerome Powell, who stated earlier this month that Bitcoin is like gold, but digital.
The currency must grow with the economy
One of the most important points that Daly focused on in her remarks was the property of growing with the economy that currencies must have in order to become a real currency. She explained, “The basic property that a currency needs is to grow with the economy.” This is different from simply increasing demand for it, as increasing demand for the US dollar, for example, does not lead to an increase in its value.
The real value of a currency lies in how strong the economy is and how fast it grows compared to other economies. Daly added that this is the standard that cryptocurrencies must adhere to in order to be able to become a globally accepted currency. However, cryptocurrencies, including Bitcoin, still seem far from gaining recognition as an official currency by the US Congress, which means they may remain distant from the role of actual currency in the global economy.
The rapid development of the cryptocurrency market
Although cryptocurrencies do not have full recognition as legal tender, they have still recorded strong growth in the markets. For example, Bitcoin, the most popular cryptocurrency, has seen strong performance since the election of US President Donald Trump in November 2024. Bitcoin first crossed the $100,000 barrier on December 4, 2024, recording a 38% increase since the election and 106% since the beginning of the year.
Additionally, shares of crypto-related companies, such as Coinbase Global Inc. and Robinhood, have risen by 45% and 204%, respectively, since the beginning of 2024. These increases reflect the growing interest of investors in this space, both individuals and major financial institutions.
Despite the differences of opinion between Daly and Powell, there is a consensus between them that cryptocurrencies are not yet ready to be a full-fledged currency.
A shift in major institutional investments
The enthusiasm for cryptocurrencies is not limited to individuals, but also includes institutions that usually prefer to invest in traditional stocks and bonds. In May 2024, the Wisconsin State Retirement Fund added Bitcoin to its investment portfolio. This was done by purchasing more than $160 million in shares from two funds that were approved by regulators earlier that year.
Additionally, MicroStrategy, led by Michael Saylor, has continued to buy large amounts of Bitcoin in recent weeks. This reflects a significant shift in the attitudes of major financial institutions towards cryptocurrencies as an investment vehicle.
The role of the US government in regulating cryptocurrencies
On the other hand, President Trump’s administration appointed David Sachs, a venture capitalist, as the chief cryptocurrency advisor. Sachs will oversee crypto-related initiatives, including a proposal to create a national Bitcoin reserve. This step seems unconventional in the world of cryptocurrencies. Mark Palmer, an analyst at Benchmark, discussed these shifts and said, “Having someone focus on making the United States a leader in cryptocurrencies, Bitcoin mining, and other areas that President Trump has talked about is a radical change.”
The outlook for cryptocurrencies
What is happening in the world of cryptocurrencies today indicates that there is a rapid shift in how they are viewed in the future. While San Francisco Federal Reserve President Mary Daly’s statements confirm that cryptocurrencies are not ready to be real money, the market is witnessing a significant shift in investment interest.
Cryptocurrencies continue to attract huge investments from individuals and companies alike, which could contribute to their value in the future. With increasing calls for better regulation of the market, we may see more legislation that will contribute to the stability of the market and ensure its long-term sustainability.
The need to understand cryptocurrencies more deeply before classifying them
Although cryptocurrencies are still far from becoming real currencies according to traditional definitions, the market is witnessing rapid growth. Statements by Federal Reserve Chair Mary Daly emphasize the need to understand cryptocurrencies more deeply before classifying them, but she does not deny the common characteristics between cryptocurrencies and gold. With the continued growth in investments in this field, and new government directions, the equations may change in the future.
