Cryptocurrencies are challenging but innovative to the market
Lately, the Federal Reserve in the United States has been thinking about how cryptocurrencies can potentially impact the economy.
Fed Governor Lael Brainard has hinted on how the Fed’s stance on how digital currencies will take shape. Although it will take some time to indicate the agencies final decision, the Federal Reserve is trying to understand this important market.
During a Fed Conference in San Francisco, Mr Brainard was quoted by Reuters as stating that, “Cryptocurrencies are strikingly innovative but also pose challenges associated with speculative dynamics, investor and consumer protections, and money-laundering risks.”
This week in New York, a Consensus 2018 conference was underway. Surprisingly James Bullard, St Louis Federal Reserve Bank President also attended this conference.
Are Cryptocurrencies a Risk or a Reward?
Without a doubt, the Federal Reserve see cryptocurrencies as a risky market, outweighing its rewards. In a letter, Ms Brainard defined blockchain as accepting payments into a bank-to-bank system transferring trillions of dollars with limited payment applications in use.
The only risks that cryptocurrencies face, particularly are those that contain anonymous features which can easily be used in fraudulent transactions. Besides, cryptocurrencies do not give any centralised control thus consumers and investors are left in a vulnerable position. Since policymakers are easing into regulating cryptocurrencies, it is evident that the digital market is blossoming. However, the tone that policymakers are casting on cryptos was resonated by Ms Brainard, stating that they are “problematic”. Additionally, she continued by stating that cryptocurrencies are delving into the global economy which has a higher risk of becoming destabilised.
Speculation into Implementation?
Critics are postulating that the Federal Reserve might be in the process of launching the “Fedcoin”. Markets were increasing their speculation since Mr Bullard’s presence at the blockchain conference. However, Mr Bullard was quick to negate such allegations.
In a statement, Ms Brainard stated that “There is no compelling demonstrated need for a Fed-issued digital currency.”
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