Cryptocurrencies are changing the U.S. currency system in ways that may facilitate illegal activity and instability in prices, St. Louis Federal Reserve President James Bullard said on Friday.
“The current situation could be described as a drift toward a non-uniform currency in the U.S.,” Bullard said in a presentation prepared for delivery at an academic conference. “One suspects that consumers and businesses will not like a non-uniform currency in which many types of currency trade simultaneously at a variety of prices in a local market.”
While it is possible for multiple currencies to exist simultaneously and lead to more voluntary transactions, “in the real world, some of these now-enabled transactions may be illegal or quasi-legal,” he said.
He added: “Cryptocurrencies may unwittingly be pushing in the wrong direction in trying to solve an important social problem, which is how best to facilitate market-based exchange.”
Bullard’s comments come as regulators are struggling with how to address a wave of newly created digital “currencies” being used to raise funds for businesses, among a host of other uses.
Fed Chairman Jerome Powell said earlier this month that plans by Facebook Inc to build a digital currency called Libra “cannot go forward” until serious concerns are addressed, comments that pressured the project and dented the price of the original cryptocurrency bitcoin.