One more Central Banker is not very happy with the rise of cryptocurrencies. James Bullard, the head of St. Louis Federal Reserve in United States has voiced his concerns regarding cryptocurrencies recently in a CNBC interview. And the chief among those concerns is the possibility of a non-uniform financial system.
Bullard was speaking to CNBC host Seema Mody at Consensus 2018 (yes, he said these things at world’s largest cryptocurrency event), and during his interview he said that cryptocurrencies can affect the exchange rate of US dollar, which is a “big deal”. This thing, Bullard said, can take us back to 1830s when money was created privately and there was little-to-no consensus on the value of money. He said:
“When you’ve a lot of currencies trading around, the exchange rate problem is a big deal. Because you don’t know how they’re gonna trade against each other. And that happens even with big time currencies like the Yen and the Dollar.”
When asked specifically “Is bitcoin a threat to US dollar?”, Bullard said:
“I don’t think so at this point. We don’t know how future is gonna unfold but my idea is that there’s a lot of currency competition going on right now. The dollar has been the winner historically because it’s backed by the largest economy and a relatively stable policy in terms of low inflation and that’s going to be tough to beat. But a lot of people here want to beat it.
However, at the same time Bullard was also not entirely critical of cryptocurrencies. He also pointed out how these currencies are facilitating cross-border transactions at cheaper rates that would otherwise have not been possible. Also this second part of his comments is similar to what Bank of England Governor Mike Carney had said some time ago – that cryptocurrencies don’t pose any significant threat to the formal financial system at this point.
Bullard was the sole US government official available at Consensus 2018. When CNBC host asked if that’s the sign of a Federal Reserve working on its own digital currency coming, he didn’t dismiss the idea immediately. He said:
“We can certainly look at that as a possibility, and there’re different parts of Fed that look at all kinds of applications of blockchain technology. But I won’t say that there’s any plan at this point or anything eminent. My own personal opinion is at this point I don’t see what the gains would be to the Fed from that… But I’ll certainly keep an open mind.”
In a nutshell, US regulators want to stay in the game, probably to have at least some sort of control/oversight on exchange rate issue, but they don’t have any plans regarding a Fed Coin at this point.