As cryptocurrencies continue to garner attention and the value of options like bitcoin reach new heights, the Federal Reserve is apparently considering creating a similar product of its own. During a conference on Wednesday, a Federal Reserve official spoke to the idea, though stated the creation of such a currency likely wouldn’t take place until well into the future.
As reported by CNBC, president and CEO of the Federal Reserve Bank of New York William Dudley indicated that the organization is exploring options in regards to creating their own form of digital currency, even though he has stated that he views bitcoin as “more of a speculative activity” since “It’s not a stable store of value.”
While the conference was occurring, bitcoin reached a new high, exceeding the $11,000 mark just the day after crossing $10,000.
Other Fed officials have also openly discussed bitcoin, including Patrick Harker, the Philadelphia Federal Reserve president, who expressed skepticism that cryptocurrencies threatened the US dollar.
“The paper that’s in your pocket, that we call money,” said Harker, “only has value because we believe it has value, because we believe the government stands behind it.”
He continued, “It’s all trust issues.”
Harker believes that the lack of government backing for cryptocurrencies would prevent it from ultimately undermining currencies like the dollar.
Minneapolis Fed President Neel Kashkari has expressed sentiments similar to Harker’s, though admits that the blockchain technology that allowed bitcoin to rise to fame has “potential” for further development.
Blockchain allows for the recording of digital transactions involving currencies like bitcoin, though its function as a recordkeeper also has applications in other areas of the finance world as well as digital contracts and more.
Dudley admits it would be “very premature” to assume that the Fed will ultimately develop its own cryptocurrency, though the discussion on the topic shows that they have take notice of the rise of Bitcoin and are having to give the idea some serious thought.
However, some are concerned that bitcoin’s recent meteoric rise represents a potential bubble that could burst, similar to the housing market collapse that led to the most recent financial crisis or the previous dot-com book and subsequent crash.
One potential saving grace, should the bubble burst, according to Dudley is that “bitcoin is tiny relative to the amount of payment transactions that are executed in the United States,” suggesting that the impact of a crash would be minimal.