Central bankers have a lot to say about bitcoin. Federal Reserve Bank of St. Louis President and CEO James Bullard acknowledges that cryptocurrencies are a disruptive force to the economy. Like his boss, Fed Chairman Jerome Powell, Bullard also appears to worry that cryptocurrencies are a menace to the financial system for a couple of reasons. He believes that crypto paves the way for crime, and he is focused on the fact that bitcoin is accompanied by high volatility. Bullard stated:
“Cryptocurrencies may unwittingly be pushing in the wrong direction in trying to solve an important social problem, which is how best to facilitate market-based exchange.”
Bullard issues a reminder that cryptocurrencies aren’t the first competition that fiat money has seen, pointing to the example of cigarettes which “became a currency among POWs during World War II.” He said:
“I want to view cryptocurrencies of various types as new entrants into the ongoing global currency competition.”
And while he cites research that implies that “public and private currencies can compete and coexist,” he doesn’t seem to think that digital currencies will last the test of time.
“Cryptocurrencies are creating drift toward a non-uniform currency in the U.S., a state of affairs that has existed historically but was disliked and eventually replaced.”
He doesn’t expect that consumers and businesses will support it, but the crypto community is convinced that mainstream adoption is inevitable.
Bitcoin remains a highly volatile asset, and Bullard seems to believe that it will stay that way forever and therefore payments are not a suitable use case:
“Currencies have to be reliable and hold their value. This is probably why government backing has been important historically, combined with a stable monetary policy that promotes stability of the currency.”
This has been a week of crypto backlash in the U.S., including lawmakers such as Brad Sherman, who went so far as to liken bitcoin to the terrorist attacks that took place in this nation on 9/11.
Meanwhile, CoinShares Chief Strategy Officer Meltem Demirors testified before the House this week and made the media rounds afterward. Her message was that cryptocurrencies are here to stay and bitcoin is not Libra.
Last modified: June 23, 2020 2:44 PM UTC