St. Louis Fed’s James Bullard Thinks Cryptocurrencies are Counterproductive
Not everyone is a big fan of Bitcoin and other cryptocurrencies. This is especially true in the case of government officials and banking experts. The St. Louis Federal Reserve Bank’s James Bullard recently made an interesting comment. In his view, cryptocurrencies oppose the need to create a market-based currency trading system with consistent pricing.
James Bullard Dislikes Cryptocurrency
It is evident the growth of Bitcoin and other cryptocurrencies should not be underestimated. Despite a fair few price dips in the past few months, it seems the general demand for exposure to Bitcoin and altcoins is not diminishing in the least. This is not to the liking of most government and banking officials, for rather obvious reasons.
James Bullard, the head of the St. Louis Federal Reserve Bank, is growing rather concerned over the popularity of this new form of money. More specifically, he considers it to be rather counterproductive for a nation which seeks price stability first and foremost. Cryptocurrencies are inherently volatile, and their massive price swings can cause a fair few problems along the way. Stablecoins may be able to counter this negative trend, but it is evident they are also far less exciting to speculators and investors.
According to Bullard, cryptocurrency is the latest in a series of unsuccessful ‘non-uniform currencies’ that were ultimately replaced. Then again, none of the previous ones came anywhere close to Bitcoin or other cryptocurrencies, which makes this comparison rather moot. However, Bullard did make an interesting remark regarding the overall market.
In his speech at Consensus, he explained how different currencies trading at different prices in the same market creates a tangled mess. In the financial world, various currencies trade in all countries at different prices. A euro in the US doesn’t have the same value as a pound sterling, a Swiss franc, or a South African rand. Even so, those currencies can co-exist without problems, and hence cryptocurrencies should – theoretically – be able to do the same.
For Bullard, it seems cryptocurrency may be “pushing in the wrong direction in trying to solve an important problem.” It is true there are a lot more cryptocurrencies than fiat currencies, stocks, etc. However, this is also what makes the market so appealing, as there is a lot more to this industry than just Bitcoin and Ethereum. A uniform currency model – as exists with the US dollar – doesn’t work all that well either.
Discussions like these never serve any real purpose in the long run. The people can decide whether or not they want to partake in cryptocurrency. Such a decision should never be made for them, especially not by government officials. It is impossible to create one unified currency which makes everyone happy, simply because people have different needs and expectations. The Federal Reserve is still a powerhouse, but it continues to face stiff competition from Bitcoin and altcoins.