The president of the Federal Reserve Bank of St. Louis, James Bullard, has shared his view on the future of bitcoin. He is confident that the cryptocurrency poses no threat to the U.S. dollar. Referencing the unpopularity of various versions of dollars issued before the Civil War by banks, Bullard predicts the same fate will happen to bitcoin.
St. Louis Fedâ€™s President Says Bitcoinâ€™s Popularity Wonâ€™t Threaten the Dollar
James Bullard said in an interview with CNBC last week that increasing interest in bitcoin, coupled with all-time high prices, does not pose a threat to the U.S. dollar as the worldâ€™s reserve currency. Bullard is an economist who has been the president of the Federal Reserve Bank of St. Louis since 2008.
â€œI just think for Fed policy, itâ€™s going to be a dollar economy as far as the eye can see â€” a dollar global economy really as far as the eye can see â€” and whether the gold price goes up or down, or the bitcoin price goes up or down, doesnâ€™t really affect that,â€ the St. Louis Fed president explained.
Bullard expressed concerns about widespread financial transactions using different cryptocurrencies that are not issued by governments. â€œDollars can be traded electronically already, so Iâ€™m not sure thatâ€™s really the issue here. The issue is privately issued currency,â€ he asserted.
He then referenced the time before the Civil War, describing that at the time it was common for banks to issue their own currencies. He likened the situation to financial institutions â€” such as Bank of America, JPMorgan, and Wells Fargo â€” all having distinct brands of dollars, elaborating:
â€œYou donâ€™t want to go to a nonuniform currency where youâ€™re walking into Starbucks and maybe youâ€™ll pay with ethereum, maybe youâ€™ll pay with ripple, maybe youâ€™ll pay with bitcoin, maybe youâ€™ll pay with a dollar. That isnâ€™t how we do this. We have a uniform currency that came in at the Civil War time,â€ he affirmed.
Regarding whether bitcoin or other cryptocurrencies pose a threat to the U.S. dollar, Bullard stressed that competition is nothing new and has existed for centuries. â€œIt is a currency competition, and investors want a safe haven. They want a stable store of value, and then they want to conduct their investments in that currency,â€ he described.
The president of the Federal Reserve Bank of St. Louis proceeded to make examples of the euro and the Japanese yen as competing currencies. â€œNeither of those is going to replace the dollar,â€ he emphasized, concluding:
Meanwhile, some analysts are not as optimistic about the U.S. dollar as Bullard. Morgan Stanley Investment Managementâ€™s chief global strategist, Ruchir Sharma, said last week that â€œBitcoin is also starting to make progress on its ambition to replace the dollar as a medium of exchange.â€ In July last year, Goldman Sachs warned that the U.S. dollar risks losing its world reserve currency status. In Russia, gold has already exceeded the U.S. dollar in the countryâ€™s reserves as Russian President Vladimir Putin focuses on de-dollarization.
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