St. Louis Federal Reserve Chairman James Bullard told CNBC on Tuesday that he believes the growing interest in bitcoin does not pose a serious threat to the US dollar as the world’s reserve currency.
“I just think for Fed policy, it will be a dollar economy as far as the eye can see, a global dollar economy actually as far as the eye can see, and if the price of gold goes up or down, or the price of bitcoin . goes up or down, it doesn’t really affect that, “Bullard said on” Squawk Box. “
Bitcoin, in particular, has been championed by crypto bulls as a store of value that can be used to hedge against inflation or the degradation of fiat currencies like the dollar. Some have touted it as “digital gold.” Furthermore, bitcoin and other cryptocurrencies are also presented as a way to buy goods and services as real money.
Bullard, who has run the St. Louis Fed since 2008, expressed concern about widespread transactions using a variety of cryptocurrencies that are not issued by governments. “Dollars can already be traded electronically, so I’m not sure that’s really the problem here. The problem is privately issued currency,” he said.
Before the Civil War, it was common for banks to issue their own bills, Bullard said. He compared it to Bank of America, JPMorgan, and Wells Fargo, all with different dollar brands. “Everyone was bargaining and bargaining at different discounts with each other, and people didn’t like it at all,” he said.
“I think the same would be true of bitcoin here,” said Bullard. “You don’t want to go to a non-uniform currency where you walk into Starbucks and maybe you pay with ethereum, maybe you pay with ripple, maybe you pay with bitcoin, maybe you pay with a dollar. That’s not how we do this. We have one. uniform currency that entered the Civil War era. “
Bullard’s comments came shortly after the price of bitcoin eclipsed $ 50,000 per coin for the first time. The last higher tranche for bitcoin follows movements into the crypto space by established financial firms like 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. Some saw the EV maker’s action as another important step toward wide acceptance of bitcoin, which is the world’s largest digital currency by market value.
While Uber doesn’t plan to buy bitcoin as an investment, CEO Dara Khosrowshahi said it’s possible that the food delivery and transportation company will eventually allow customers to pay with digital currencies. “Just as we accept all types of local currency, we are going to consider cryptocurrency and / or bitcoin in terms of currency to transact,” Khosrowshahi told CNBC on Thursday. “We will certainly see that and if there is a benefit there, 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 emphasized that the competition has nothing new. It’s something that has happened for centuries, he said. “It’s currency competition, and investors want a safe haven. They want a stable store of value and then they want to invest in that currency,” the St. Louis Fed chairman said.
For example, he argued that both the euro and the yen are strong currencies. However, “none of them are going to 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 are going to see any change in the future.”