The Rise of Crypto Poses Important Questions for Central Banks: NY Fed President

New York Federal Reserve Bank President – John Williams – opined that the rapid development of virtual assets challenges the central banks’ desire to launch their own CBDCs. He advised policymakers to consider how cryptocurrencies would work efficiently alongside physical cash.

Crypto Raises Questions for Central Banks

John Williams – the president and CEO of the Federal Reserve Bank of New York – reacted to the recent presentation of the former Bank of England governor Mark Carney who urged central banks to examine digital assets.

The top executive believes that central banks and the Federal Reserve, in particular, should not leave unanswered questions about blockchain technology and its regulation if they are willing to issue their own CBDCs:

“Before central banks like the Federal Reserve can issue their own CBDC, several major questions pertaining to blockchain technology and regulation need to be addressed.”

Williams asserted that digital assets should be implemented successfully in the financial world alongside physical cash. Countries’ officials must work towards that goal and adjust the proper regulations.

The 59-year-old economist John Williams is the 11th president of the Federal Reserve Bank of New York. Previously, he had the same role but on the West Coast as he was in charge of the Federal Reserve Bank of San Fransisco from 2011 to 2018. Moreover, Williams is currently serving as vice-chairman of the Federal Open Market Committee.

The US Should Be Cautious With its CBDC

Last year, the Fed Chair – Jerome Powell – opined that the United States should not strive to be the first country to launch its own central bank digital currency but to focus on issuing it the right way:

“The US is committed to carefully and thoughtfully evaluating the potential costs and benefits of a CBDC for the US economy and payments system.”

Back then, he admitted that digital currencies have the potential to improve the current payments system. However, the Federal Reserve hadn’t made a final decision on launching its own.

On another occasion this year, Powell shared his point of view on bitcoin. He surmised that the primary cryptocurrency remains a speculative form of investment that won’t replace the US dollar due to its enhanced volatility. On the other hand, it has the chance to do so with gold.

Featured Image Courtesy of FT