James Ballard (James Bullard), President of the Federal reserve Bank of St. Louis, said that the cryptocurrency «provoke the appearance in the United States are not standardized currency.»
Ballard spoke about the history and Economics of private currency Consensus conference 2018 in new York, based on its experience in this area. He told the audience that public and private currencies can «coexist in equilibrium» and even «to help the implementation of transactions that would not otherwise occur».
But U.S. history shows that currency competition often causes more problems than it solves, he said. In the 1830-ies 90% of the currency in circulation was issued in private, a single dollar was used only during the civil war.
«There were banknotes of Bank of America, Bank note Wells Fargo, but they were impaired,» said Ballard.
To date, produced about 1800 cryptocurrency. According to Ballard, in this regard, there is a chance to return to the past «chaos in exchange rates». Consumers could be faced with the need to have multiple forms of currency for different transactions, he said, each transaction will have a different relative price — not to mention the risk that the currency will depreciate, depriving consumers of their savings.
«The currency needs to be reliable and keep its value,» said Ballard, citing the example of the hyperinflation of the Venezuelan Bolivar.
As for whether the cryptocurrency «to protect us from the vagaries of Venezuelan monetary policy,» Bullard identified several major problems.
First, transactions with such currencies may be illegal. At that, the monetary principles of the cryptocurrency may not be as reliable as they claim some of their supporters. For example, the quantity of bitcoins is limited to 21 million coins, but, says Ballard, «the system can still split in two, creating two fixed amount of coins.» According to Ballard, the problems with monetary policy are not solved by cryptocurrencies.
Thoughts about the future
Following introductory remarks by Ballard he was joined by Diane Brady (Diane Brady), journalist and founder of dbOmnimedia. She asked whether the government control the only way to ensure a stable monetary system. Ballard said: «In this century, last century, it was only possible this way. Will always so I don’t know. May be some technological solutions».
At the moment, according to him, cryptocurrency does not pose a threat to the dominance of the dollar because of their low transaction volumes. «Today the dollar is in great shape,» he said. «He’ll remain in great shape.»
However, in the long term growth of crypto-currencies could stimulate the creation of something similar to today’s global monetary system. Ballard said that since there is not a single world currency, even the exchange rates among the major currencies can be unstable. He concluded:
«The movement towards not standardized currency can be a serious problem for US if the crypto trade will reach big volumes.»
In the past representatives of the FRB has repeatedly spoken about the cryptocurrency. In March, the President of the Atlanta fed urged
to refrain from investing in cryptocurrency, and last fall the head of the Philadelphia fed, said that the bitcoin is unlikely to affect the monetary policy of the United States.
In December of 2017, the fed Chairman called bitcoin a «speculative asset» and a candidate for the post of the future fed Chairman said that «today the cryptocurrency will not affect our work.» Moreover, the representatives of the fed with a positive look at the introduction of the blockchain: last fall, Vice President, Federal reserve Bank of Boston noted that the technology will move SWIFT and other intermediaries.