St. Louis Federal Reserve President James Bullard told CNBC Tuesday that he believes rising interest in bitcoin is not a major threat to the U.S. dollar as the world’s reserve currency.
“I’m just thinking for Fed policy, it’s going to be a dollar economy as far as the eye can see – a global dollar economy as far as the eye can see – and the price of gold is going up up or down, or the price of bitcoin going up or down, that doesn’t really affect that, “Bullard told Squawk Box. “
Bitcoin, in particular, has been inspired by crypto bulls as a source of value that can be used to hedge against inflation or compensate fiat currencies such as the U.S. dollar. Some have called it “digital gold.” In addition, bitcoin and other cryptocurrencies are also presenting themselves as a way to buy goods and services as real money.
Bullard, who heads the St. Louis Fed since 2008, concerns about widespread transactions using a range of cryptocurrencies that are not issued by governments. “Dollars can already be traded electronically, so I’m not sure that’s the case here. The issue is privately withdrawn money,” he said.
Before the Civil War, it was common for banks to issue their own notes, Bullard said. It was like Bank of America, JPMorgan and Wells Fargo all with unique brands of dollars. “They were all trading around and trading at different discounts with each other, and people didn’t like them at all,” he said.
“I think the same thing would happen with bitcoin here,” Bullard said. “You don’t want to go to non-uniform money where you walk into Starbucks and you might pay with Ethereum, you might pay with Ripple, you might pay with bitcoin, and you may pay a dollar. That’s not how we do it. We have a uniform frontier that came in during the Civil War. “
Bullard’s comments came shortly after the price of bitcoin eclipsed $ 50,000 per coin for the first time. The latest higher leg for bitcoin follows moves into the crypto space with established financial companies such as BNY Mellon and Mastercard.
Tesla announced last week that it had bought $ 1.5 billion worth of bitcoin using cash on its balance and planned to accept the digital coin as payment for its products. Some saw the action of an electric vehicle manufacturer as another major step towards widespread adoption of bitcoin, the world’s largest digital currency by market value.
While Uber does not intend to buy bitcoin as an investment, CEO Dara Khosrowshahi said it is possible that the food delivery and delivery company would allow customers to pay with digital coins. “Just as we accept all forms of local currency, we are going to look at cryptocurrency and / or bitcoin in terms of cross-border currencies,” Khosrowshahi told CNBC on Thursday. “We’ll definitely look at it and if there’s an advantage, if that’s needed, we’ll do it. We’re not just going to do it as part of an incentive.”
When considering whether cryptocurrencies threaten the U.S. dollar, Bullard stressed that there is nothing new about competition. It is something that has been going on for centuries, he said. “It’s money competition, and investors want safe haven. They want a stable source of value, and then they want to make their investments in that money,” the president of St. . Louis Fed.
For example, he said that both the euro and the Japanese yen are strong currencies. However, “none of that is going to replace the dollar,” he said. “It would be very difficult to get private money that is much more like gold to play that role and I don’t think we will see any changes in the future.”