Kevin Warsh, employed as the Fed Governor from 2006 to 2011, spoke with the media on Thursday and confessed that digital currency could be beneficial for central banks. According to New York Times, Warsh said that cryptocurrencies are volatile, however, research spent into the topic could reveal positive results.
“Most central banks have a view that these crypto-assets are clever, like guys in the garage did it and it’s kind of cool, or risky,” said Warsh. The Stanford university graduate was on his way to becoming the chairman of the Federal Reserve, but U.S. President Donald Trump thought he was too young “to be viewed credibly by the markets in the event of a financial crisis”.
Warsh believes that officials need to spend more time on cryptocurrencies. He even said that if he had been given a position in the Fed, he would have put together a team to “to think about the Fed creating FedCoin”. Combining legal activities with cryptocurrencies would be his ultimate solution.
Not that it would supplant and replace cash but it would be a pretty effective way when the next crisis happens for us to maybe conduct monetary policy.
Blockchain technology, less controversial than cryptocurrencies, could also provide various solutions for central banks. The decentralized, transparent and secure nature of the technology could speed up the payment process between banks.
Congress gave the Fed a monopoly over money. And if the next generation of cryptocurrencies look more like money and less like gold — and have less volatility associated with them so they would be not just a speculative asset but could be a reliable unit of account — as a purely defensive matter I wouldn’t want somebody to take that monopoly from me.
Warsh previously wrote an article in The Wall Street Journal on the topic of Bitcoin. He acknowledged the famous cryptocurrency as “leading the way”, however, he went on to say that all the current cryptocurrencies may end up being worthless.
Image Credit: Deposit Photos