Minneapolis Central Bank head says that cryptocurrencies are unpopular as a means of payment for legal purchases

What’s new? Federal Reserve Bank of Minneapolis President Neel Kashkari has said that cryptocurrency has virtually no legal transactions and is predominantly used to buy drugs or engage in other illegal activities.

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What else is known? Kashkari, a former investment banker, took over as president of the Minneapolis Central Bank in 2016, and in recent years he has often criticized cryptocurrencies. In 2020, he called the crypto market a giant dumping ground and praised the Securities and Exchange Commission (SEC) for its strict oversight of initial coin offerings (ICOs). In 2021, he drew attention to the fact that the crypto market is flooded with thousands of junk coins.

Also in 2021, Kashkari called Dogecoin (DOGE) a financial pyramid scheme. DOGE has been on the market for more than 10 years and maintains its position as the leading meme token by market capitalization with a figure of $20,9 billion.

The official’s new comment comes amid the increasing institutionalized adoption of cryptocurrencies. After the SEC approved spot bitcoin exchange-traded funds (ETFs) in January 2024, players in the traditional financial sector have become more interested in investing in cryptocurrencies.

The issuers of bitcoin funds are leading investment companies, including the world’s largest BlackRock with $11,5 trillion in assets under management; these products are traded on the leading US stock exchanges: Nasdaq, NYSE, and CBOE.

According to a recent Nickel Digital survey, about 80% of institutional investors plan to increase their investments in digital assets in the coming months.

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The Pew Research Center reported in a 2023 survey that only 17% of US adults have ever owned digital assets. According to the Fed’s 2022 data, only 2% of US adults have made payments using cryptocurrencies. This is likely the data Kashkari was relying on when he argued in a new speech that very few transactions take place with cryptocurrencies, and they are hardly used to pay for goods and services.

Earlier, the SEC chief also questioned whether cryptocurrencies would ever become a popular payment medium. According to Gary Gensler, they will continue to be used as an inflation hedge.

The US Federal Reserve, which serves as the central bank, has the power to impose restrictions on cryptocurrency banking activities, as well as to issue a digital dollar (central bank digital currency, CBDC). The issue of issuing a national cryptocurrency has been postponed indefinitely by the Fed due to the unclear prospects and benefits of the initiative, as well as the risks of surveillance of users.

As for private cryptocurrencies, regulators have also repeatedly voiced their concerns. For example, the Federal Reserve Banks of Boston and New York called stablecoins a source of financial instability.

In previous years, authorities in various countries have repeatedly emphasized that the bulk of transactions with cryptocurrency accounted for illegal activities, but with the industry entering the legal field, such statements are heard less and less often.

Nevertheless, this month the UN announced the growing popularity of the largest stablecoin USDT from the company Tether among criminals. It is noted that USDT on the TRON blockchain is most often used in illegal activities.

Last year, experts interviewed by Reuters claimed that TRON had overtaken the bitcoin blockchain in popularity among terrorists.