St. Louis Federal Reserve Chairman James Bullard told CNBC on Tuesday that he believes that increased interest in bitcoin does not pose a serious threat to the U.S. dollar as the world’s reserve currency.
“I just think that for Fed policy, it will be a dollar economy as far as the eye can see – a global dollar economy as far as the eye can see – and whether the price of gold will go up or down, or the price of bitcoin goes up or down, it doesn’t really affect that, “said Bullard in” Squawk Box “.
Bitcoin, in particular, has been defended by cryptocurrencies as a store of value that can be used to protect against inflation or the devaluation of fiat currencies like the dollar. Some consider it “digital gold”. In addition, bitcoin and other cryptocurrencies also present themselves as a way to buy goods and services, like real money.
Bullard, who has led the St. Louis Fed since 2008, expressed concern about widespread transactions using a variety of cryptocurrencies that are not issued by governments. “Dollars can now be traded electronically, so I’m not sure if that’s really the problem here. The issue is privately issued currency,” he said.
Before the Civil War, it was common for banks to issue their own notes, Bullard said. He compared that to Bank of America, JPMorgan and Wells Fargo, all with distinct dollar marks. “They were all negotiating and negotiating at different discounts for each other, and people didn’t like that at all,” he said.
“I think the same would happen with bitcoin here,” said Bullard. “You don’t want to go to a non-uniform currency where you are entering Starbucks and maybe you pay with ethereum, maybe you pay with a ripple, maybe you pay with bitcoin, maybe you pay with a dollar. That’s not how we do it. We have one uniform currency that emerged during the Civil War. “
Bullard’s comments came shortly after the price of bitcoin exceeded $ 50,000 per coin for the first time. The last upward step of bitcoin follows movements in the cryptographic space of established financial firms, such as BNY Mellon and Mastercard.
Tesla also announced last week that it bought $ 1.5 billion in bitcoin using cash on its balance sheet and planned to accept digital currency as payment for its products. The action of the electric vehicle maker was seen by some as another big step towards the widespread acceptance of bitcoin, which is the world’s largest digital currency by market value.
Although Uber does not plan to buy bitcoin as an investment, CEO Dara Khosrowshahi said it is possible that the freight and food delivery company will eventually allow customers to pay with digital currencies. “As we accept all types of local currencies, we will look at cryptocurrency and / or bitcoin in terms of currency for transactions,” Khosrowshahi told CNBC on Thursday. “We will certainly see that and if there is a benefit to it, if there is a need, we will do it. We just won’t do it as part of a promotion.”
When considering whether cryptocurrencies pose a threat to the dollar, Bullard stressed that there is nothing new about competition. It has been going on for centuries, he said. “It’s a currency competition, and investors want a safe haven. They want a stable reserve of value and then they want to conduct their investments in that currency,” said the St. Louis Fed chairman.
For example, he said that both the euro and the yen are strong currencies. However, “none of these will replace the dollar,” he said. “It would be very difficult to get a private currency that is really more like gold to play that role, so I don’t think we will see any changes in the future.”