The President of the Federal Reserve Bank of St. Louis, James Bullard, says that most cryptocurrencies are “worthless”. He noted that “cryptocurrency can facilitate transactions that are difficult to conduct in traditional currencies, then have a purpose and potentially circulate alongside the currencies supported by the nation”.
Fed’s Bullard says most cryptocurrencies are worthless
Jim Bullard, president of the Federal Reserve Bank of St. Louis, spoke about inflation risks and the future of Fed policy in an interview with Yahoo Finance on Monday.
He also talked about cryptocurrency given the high volatility in crypto prices that has been observed over the past few weeks. He was asked: “How do you feel about cryptocurrency, its current use case and … how exactly have you observed the volatility in the crypto markets?”
Bullard replied, “I have a slide deck called ‘inconsistent currency and exchange rate chaos’ and a couple of things that are in it. For one, currency competition is nothing new. The issue of private currencies has been treated historically in monetary theory. “
He continued, “Milton Friedman said if you allow private currency to be issued, all types of private currency will be issued. And that’s exactly what happened, “added:
We have a few thousand of them, most of which are worthless.
“I think if cryptocurrency can facilitate transactions that are difficult to conduct in traditional currencies, then they have a purpose and could circulate alongside the nation-supported currencies,” he noted.
Bullard went on to discuss volatility in the crypto market. He said cryptocurrencies are “also quite volatile, as has been very evident here for the past few days.” However, he emphasized, “But the fact that different currencies have volatile exchange rates is a fundamental problem in the international monetary system and a much bigger problem for privately issued currencies.”
He added that “it’s even a problem for nation-state currencies, where they trade against each other in a volatile manner, which seems far from real moves and fundamentals.”
So there are a lot of interesting things in this area, and of course the Fed is also looking at a Fed coin. So we have a lot to do and we are watching this very closely. And I think … in short, here I am.
After commenting that most cryptocurrencies are worthless, Bullard was asked if they pose a financial stability risk.
He replied, “We hope that those involved know the risks. Of course, every investment you make can go up, but it can also go down. And so everyone who puts together a portfolio has to weigh the risk and return, as always in the financial sector. “The President of the Federal Reserve Bank of St. Louis concluded,” I think for the most part people like to be open-minded, they are certainly not blind to the idea that this is a volatile area. “
Bullard recently said he was confident that Bitcoin would not pose a threat to the U.S. dollar. Last week, he said the recent sell-off of cryptocurrencies is not a systematic problem for the Fed and is not affecting central bank policies.
What do you think of Bullard’s comments on cryptocurrencies? Let us know in the comments below.
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