Bitcoin or its Meteoric Rise Pose No Threat to the Global Dollar Economy Or its Reserve Currency Status: Fed President
St. Louis Federal Reserve President James Bullard doesn’t think the leading digital currency poses a serious threat to the US dollar’s status as the world's reserve currency.
“I just think for Fed policy, it's going to be a dollar economy as far as the eye can see and whether the gold price goes up or down, or the bitcoin price goes up or down, doesn't really affect that,” Bullard said on CNBC’s “Squawk Box” on Tuesday.
However, Bullard did express some concerns about the widespread use of a range of cryptocurrencies not issued by governments to pay for transactions. A growing number of big companies such as Mastercard, Uber, Tesla, Twitter, and GM are considering accepting Bitcoin as a payment option.
This is because dollars can be traded electronically; what he is concerned about is “privately issued currency,” the St. Louis Fed president said.
Bullard also said the U.S. financial conditions were “generally good” and that inflation was likely to heat up this year. But San Francisco Fed President Mary Daly said pressures on inflation are still downward.
No Changes Coming
Leading St. Lois fed since 2008, Bullard shared how before the Civil War, it was common for the banks like Bank of America, JPMorgan, and Wells Fargo to issue their own notes and have their distinct brands of dollars.
But people did not like that, and “I think the same thing would occur with bitcoin here,” he said
While name-dropping Ethereum and Ripple, he said going with a non-uniform currency isn’t how things are done, and there’s already a uniform currency, the US dollar, that came in at the Civil War time.
As for whether Bitcoin and cryptos pose a threat to the dollar, Bullard said this is nothing new, as competition has been going on for centuries.
“It 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.”
He pointed to the euro and the yen, which are strong currencies but said, “neither of those is going to replace the dollar.” Adding,
“It'd be very hard to get a private currency that's really more like gold to play that role so I don't think we're going to see any changes in the future.”
But be prepared to lose money
Amidst this, European Central Bank governing council member Gabriel Makhlouf, who is also governor of Ireland’s central bank, said he wouldn’t buy Bitcoin and compared it to the 17th century Netherlands tulip craze.
“Personally, I wouldn’t put my money into it, but clearly, some people think it’s a good bet,” said Makhlouf Tuesday at a webinar in Dublin. He said while some view Bitcoin as an investment, “three hundred years ago, people put money into tulips because they thought it was an investment.”
While he wants bitcoin investors to be prepared to “lose all their money,” Makhlouf said he is not advising people whether or not to invest in digital currency.