The president of the Federal Reserve Bank of St. Louis, James Bullard, says that most cryptocurrencies are â€œworthless.â€ He noted that if â€œcryptocurrency can facilitate transactions that are difficult to make in conventional currencies, then they will have a purpose and might circulate alongside the nation-backed currencies.â€
Fedâ€™s Bullard Says Most Cryptocurrencies Are Worthless
Jim Bullard, President of the Federal Reserve Bank of St. Louis, talked about inflation risks and what lies ahead for Fed policy in an interview with Yahoo Finance on Monday.
He also talked about cryptocurrency, given the high volatility in crypto prices observed over the past weeks. He was asked, â€œWhat are your views on cryptocurrency, its use case right now, and â€¦ how closely have you been watching a lot of the volatility in crypto markets?â€
Bullard replied: â€œI have a slide deck on this thatâ€™s called â€˜non-uniform currency and exchange rate chaosâ€™ and a couple of things that are in there. One is that currency competition is nothing new. Private currency issuance has been addressed historically in monetary theory.â€
He continued, â€œMilton Friedman said if you allow private currency issuance, youâ€™ll get all kinds of private currencies being issued. And thatâ€™s exactly what has happened,â€ adding:
â€œI think if the cryptocurrency can facilitate transactions that are difficult to make in conventional currencies, then they will have a purpose and might circulate alongside of the nation-backed currencies,â€ he noted.
Bullard proceeded to discuss the volatility in the crypto market. He said cryptocurrencies are â€œalso quite volatile, as itâ€™s been very apparent here in recent days.â€ However, he emphasized: â€œBut the fact that different currencies have volatile exchange rates, thatâ€™s a fundamental problem in the international monetary order and itâ€™s just that much bigger of a problem for privately issued currencies.â€
He added that â€œitâ€™s even a problem for nation-state type currencies where they trade in a volatile way against each other that seems to be distant from actual movements and fundamentals,â€ elaborating:
Following his comment that most cryptocurrencies out there are worthless, Bullard was asked whether it presents a financial stability risk.
He replied: â€œWe hope that those that are involved know the risks. Of course, any investment that you do can go up but it can go down as well. And so anybody thatâ€™s putting a portfolio together has to balance the risk and reward as always in finance.â€ The president of the Federal Reserve Bank of St. Louis concluded: â€œI think, for the most part, people like going into this with eyes wide open, theyâ€™re certainly not blind to the idea that this is a volatile area.â€
Bullard recently said that he is confident that bitcoin is not a threat to the U.S. dollar. Last week, he said that the recent cryptocurrency sell-off was not a systematic concern for the Fed and did not affect the central bankâ€™s policies.
What do you think about Bullardâ€™s comments on cryptocurrencies? Let us know in the comments section below.
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