Thomson Reuters
- Cryptocurrencies are 95% fraud, hype, noise, and confusion, Fed official Neel Kashkari said Tuesday.
- The Minneapolis Fed president scoffed at the idea that there are no barriers to creating your own crypto token.
- Crypto's main use case is mostly funding illicit activities like drugs and prostitution, the Fed official said.
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Federal Reserve policymaker Neel Kashkari slammed cryptocurrencies as "garbage" coins late Tuesday and was scornful of the idea that he can create a token of his own and name it "neelcoin."
Kashkari said he hadn't found a sound argument for any practical use for cryptocurrency, responding to a question at the Pacific Northwest Economic Regional annual summit.
"I was more optimistic about crypto or bitcoin about five or six years ago. So far, what I've seen is 99% … let me be charitable, 95% fraud, hype, noise and confusion," the Minneapolis Fed president said.
Kashkari said it's absurd how "thousands of these garbage coins" are being created. Their main use case is mostly funding illicit activities like drugs and prostitution, he added.
"If you go in your basement, and you want to start producing your own currency, the Secret Service is going to come knock on your door and put you in handcuffs," he said.
"There is no barrier to you creating your own bitcoin or me creating my own - I'll call it neelcoin."
Leading cryptocurrency bitcoin and the ethereum network that underpins ether have drawn the interest of institutional investors this year. Citibank and UBS are among big banks that are grabbing a piece of the crypto market. But digital assets are still seen as highly risky by big investors.
Since October 2020, consumers have reported losing more than $80 million to cryptocurrency scams, the Federal Trade Commission warned in May.
Fed Chair Jerome Powell has previously dismissed cryptocurrencies, saying they've failed as a viable payment mechanism.
Kashkari dismissed suggestions that the current high rate of inflation in the US means its economy is taking the same trajectory as Venezuela, which is grappling with hyperinflation.
"I don't see any evidence that the US government, or the United States of America, is on a path to Venezuela," he said.
Kashkari is one of the more dovish members of the Federal Open Market Committee, which determines the direction of US monetary policy. He was a big supporter of pledging further economic stimulus for the US during the depths of the coronavirus crisis.