The president of the Federal Reserve Bank of St. Louis, James Bullard, shared his views on the future of Bitcoin. He is convinced that cryptocurrencies pose no threat to the US dollar. Referring to the unpopularity of various versions of the dollars that banks spent before the Civil War, Bullard predicts that Bitcoin will suffer the same fate.

St. Louis Fed chairman says Bitcoin’s popularity won’t threaten the dollar.

James Bullard said in an interview with CNBC last week that the growing interest in Bitcoin, combined with record prices, poses no threat to the US dollar as the world’s reserve currency. Mr. Bullard is an economist and has been president of the Federal Reserve Bank of St. Louis since 2008.

I just think that for Fed policy, it will be the dollar economy as far as the eye can see – the world economy in dollars is really as far as the eye can see – and whether the gold price rises or falls or the price of bitcoin rises or falls, it doesn’t really matter, the Fed chairman said in St. John’s, Newfoundland.

Mr. Bullard expressed concern about the volume of financial transactions involving various cryptocurrencies not issued by governments. Dollars can already be exchanged electronically, so I don’t know if that’s really a problem. It is a private currency, he argued.

He then referred to the period before the Civil War and described how it was common at that time for banks to issue their own currency. He compared the situation to that of financial institutions – such as Bank of America, JPMorgan and Wells Fargo – all developing different dollar brands:

They all traded with each other and got different discounts, and people didn’t like that at all. I think the same thing is going to happen here with Bitcoin.

You don’t want to switch to a heterogeneous currency where you go to Starbucks and pay in Ether, maybe Ripple, maybe Bitcoin, maybe dollars. We don’t. We have a single currency that was introduced during the civil war, he confirmed.

Asked whether bitcoins or other cryptocurrents pose a threat to the US dollar, Mr Bullard stressed that competition is not new and has been around for centuries. It’s monetary competition and investors want a safe haven. They want to have a stable reserve of value and then spend their investments in that currency, he described.

St. Petersburg, has been appointed president of the Federal Reserve Bank of St. Louis cited the euro and the Japanese yen as examples of competing currencies. None of them will replace the dollar, he concluded:

It would be very difficult to have a private currency that really resembles gold play that role, so I don’t think we’ll see a change in the future.

Meanwhile, some analysts are not as optimistic about the US dollar as Bullard. Ruchir Sharma, Chief Strategist at Morgan Stanley Investment Management, said last week that Bitcoin is also starting to make progress in its quest to replace the dollar as a medium of exchange. Last July, Goldman Sachs warned that the US dollar could lose its status as the world’s reserve currency. In Russia, gold has already surpassed the US dollar in the country’s reserves as Russian President Vladimir Putin emphasizes de-dollarization.

Do you think Bitcoin is a threat to the US dollar? Let us know in the comment section below.

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