John Williams, a New York Federal Reserve nominee and central banker has put across his views on cryptocurrency – something that has not surprised a lot of people given his career choice. He is very adamant that cryptocurrency does not pass the basic test of what a currency should be, leaving, in his opinion no chance of it ever replacing fiat money.
Williams is currently in next in line to chair the New York Federal Reserve Bank, and is expected to take over in June, when William Dudley leaves the position, did admit that his views were very biased, thanks to his position as the head of the San Francisco Federal Reserve, but he is incredibly adamant in his views, which came during a speech he made at the end of last week.
His views are not exactly surprising. Cryptocurrencies are not favoured in the banking community, and tend to frown on anything that is not fiat money. His stance on the matter is essentially the same philosophy that many who work in the banking sector and the traditional finance space. When making his speech on Friday, Williams said;
“The idea of the supply of currency and thinking about currency really belongs more in the sphere of government and central banks. My view is it’s really more of a promise of technology.”
So why, in Williams view, does cryptocurrency not pass the basic test of what a currency should be? He starts by noting the issue of store of value. He defined a currency as;
“…basically something with a store of value, and that currencies need to be ‘elastic’ to be able to support varying economic and financial conditions.”
He also addressed the big issue that has been one of the crypto markets biggest downfalls, and that is that risk of scams and the fact that many people believe that they can help to facilitate crimes. He said;
“The setup or institutional arrangement around Bitcoin and other cryptocurrencies, first of all they have problems with fraud, problems with money laundering, terror financing. There’s a lot of problems there.”
He used another negative reason that is quite often pointed out with cryptocurrencies, and that is the price volatility. He sees this as a huge negative, that makes it very difficult for one to determine the correct prices for items.
It is a topic that is definitely split down the middle. Some experts will defend cryptocurrencies, noting the huge potential it has, and how it could work alongside fiat currency, yet many others, namely financial and banking experts, simply cannot see past the fact that it is unlikely to completely replace fiat currency any time soon.