Incoming Federal Reserve Bank of New York President John Williams said Friday that he sees value in the technology behind bitcoin, but that cryptocurrencies have no chance to function as actual currencies such as the U.S. dollar.
“In terms of bitcoin or cryptocurrencies as replacing the U.S. dollar — I’ll just be honest, this doesn’t make sense to me,” Williams said a public event in Pebble Beach, Calif.
A currency should have stable value and facilitate transactions, he noted. Bitcoin has undergone wild swings in its value, relative to the dollar, over recent months.
He also compared bitcoin to the gold standard, saying that an inelastic currency is inferior to an elastic currency that can “evolve” in line with the economy.
“I feel that this whole cryptocurrency as a currency just doesn’t pass a basic test of what a currency should be or what a supply of an elastic currency should be,” he said.
Bitcoin’s creators and its most forceful advocates favor cryptocurrency not just as a better technology that could help existing financial institutions, which was the role that Williams suggested for it Friday. Rather, they hope that a system of competing, private cryptocurrencies will replace government-issued currencies, with or without the approval of the government.
Williams acknowledged that, as a career central banker, he is biased, but said that the management of currencies “really belongs more in the sphere of governments and central banks, because we can solve these big problems.”
Williams is currently the president of the San Francisco Fed, but is set to take over the top spot at the New York regional bank, which plays a key role in the monetary system and entails a permanent vote in setting the nation’s monetary policy.
