St. Louis Fed President James Bullard raised concerns about the rise of cryptocurrencies on Friday, joining other prominent economic and political officials who have questioned the fledgling platforms as Facebook prepares to launch its “Libra” digital token.
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Bullard warned the rise of other currencies, digital or otherwise, that would compete against the U.S. dollar in the domestic marketplace could have an adverse effect on the dollar’s value. While competing currencies can lead to more voluntary transactions, which are a positive for the economy, they could also lead to some “now-enabled transactions [which] may be illegal or quasi-legal,” he noted.
“Cryptocurrencies are creating drift toward a non-uniform currency in the U.S., a state of affairs that has existed historically but was disliked and eventually replaced,” Bullard said while speaking at the Central Bank Research Association’s 2019 meeting in New York, adding that “currencies have to be reliable and hold their value.”
Bullard identified illegal drug trades or the avoidance of existing financial regulations as some examples of potential illegal activity.
Bullard’s remarks came days after Fed Reserve Chairman Jerome Powell expressed concern about Facebook’s planned Libra launch. Powell said regulators would have evaluate the digital currency before it can launch, warning that it poses risks in terms of “privacy, money laundering, consumer protection [and] financial stability.”
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President Trump said last week that he is “not a fan of bitcoin and other cryptocurrencies” and asserted that Facebook would need a bank charter and submit to banking regulations before it could proceed.
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“We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable,” Trump wrote on Twitter.
Congressional lawmakers grilled David Marcus, head of Facebook’s cryptocurrency efforts, in a pair of hearings earlier this week.
