They may also be used to facilitate financial transactions that could otherwise be difficult.Ĭryptocurrencies, however, are currently viewed more as a store of value than as a medium of exchange.
In theory, the new payment technologies that have emerged in recent years may help reduce costs and improve efficiencies of financial transactions. Some Potential Risks of These Payment Technologies But cryptocurrencies may unwittingly be pushing us back in the direction of a non-uniform currency system. People didn’t like that system, and a uniform currency was implemented in the U.S.
Similar to today’s global currency system, the pre-Civil War era was characterized by exchange rate chaos, with currencies constantly fluctuating against one another. Publications listed and frequently updated the going exchange rates for different currencies in particular locations. money supply consisted of privately issued banknotes. In the pre-Civil War era, the majority of the U.S. I have argued that cryptocurrencies may be creating a movement toward non-uniform currency in the U.S.-a system that society has disliked historically. The exchange rates between the public and private currencies tend to be more volatile than the exchange rates between various public currencies. In the current environment, privately issued currencies (such as cryptocurrencies) are also competing with publicly issued currencies. Globally, we have ample currencies issued by government monetary authorities, and these currencies tend to trade at volatile exchange rates.
For example, I spoke about “Non-Uniform Currencies and Exchange Rate Chaos” (PDF) at a May 2018 CoinDesk conference.Ĭurrency competition is nothing new. As a research economist myself, in addition to my role as a monetary policymaker, I have studied “private money” and have given talks on currency competition. Louis Fed have been studying innovations such as those discussed in this annual report for several years now.Ĭryptocurrencies and a Non-Uniform Currency SystemĬryptocurrencies were introduced to the global economy more than a decade ago, and since then, they have inspired much research and commentary. While these payment technologies are new to some, economists at the St. Therefore, our 2021 annual report examines opportunities and concerns surrounding cryptocurrency, blockchain and decentralized finance. An important issue in this area today is the emergence of new payment technologies, given their potential to transform money and the payments system. Louis has a long tradition of providing thought leadership in monetary economics. James Bullard is the president and CEO of the Federal Reserve Bank of St.
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