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 the widespread misconceptions about cryptocurrencies must be abandoned, and that it is necessary to define what they are accurately. 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 added that the value of the currency must not only rise due to increased demand for it, but must be directly linked to the performance of the economy. For example, the value of the US dollar is closely linked to 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, the US Congress continues to withhold recognition of cryptocurrencies, including Bitcoin, as official currency. This decision keeps them distant from serving as actual currency in the global economy.
The rapid development of the cryptocurrency market
Although governments have not fully recognized cryptocurrencies as legal tender, they continue to record 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
Institutions that typically invest in traditional stocks and bonds now share the enthusiasm for cryptocurrencies. In May 2024, the Wisconsin State Retirement Fund expanded its portfolio by adding Bitcoin. The fund purchased more than $160 million in shares from two regulator-approved funds introduced 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
David Sachs, a venture capitalist, now serves as the chief cryptocurrency advisor to President Trump’s administration. Sachs will oversee crypto-related initiatives, including a proposal to establish a national Bitcoin reserve. Analysts view this as an unconventional move in the cryptocurrency space. Mark Palmer, an analyst at Benchmark, highlighted the significance of these shifts: “The focus on positioning the United States as a leader in cryptocurrencies, Bitcoin mining, and other areas championed by President Trump represents a radical change.”
The outlook for cryptocurrencies
The world of cryptocurrencies today shows a rapid shift in how people view them for 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.
