Bitcoin's Growing Influence
Bitcoin has had quite an exciting year. On November 28, the digital currency set yet another record when it surpassed $10,000, making it one of the world's 30 largest currencies. Since January, it has grown by 1,300 percent, and much of that growth has been extremely recent — at the beginning of November, bitcoin was worth a little over $7,000.
Needless to say, it's becoming increasingly difficult to ignore bitcoin — especially for those who once criticized it — and in any conversation involving currencies, it's inevitable that the leading crypto will come up.
Such has been the case for William Dudley — Reuters reports that the president of the Federal Reserve Bank of New York (Fed) has been asked about bitcoin multiple times at recent speaking engagements.
On November 29, Dudley spoke to a group of students and professors at Rutgers University, and his words make it clear that the Federal Reserve is paying attention to bitcoin and its significant growth. According to Dudley, the organization is considering offering their own form of digital currency — much like Russia is doing with the CryptoRuble and Japan with the J-Coin — but such an offering wouldn't come to fruition any time soon.
“At this point, it’s really premature to be talking about the Federal Reserve offering digital currencies,” said Dudley. “But it is something we are starting to think about: what would it mean to have a digital currency, what would it mean to offer it, do we actually need it?”
During a separate talk that took place on November 27 — before the latest bitcoin surge occurred — Dudley was reportedly asked if digital currencies were a new form of exchange, a commodity, "a roulette wheel," or "a tulip” — a tulip, in this instance, being a reference to a well-known market crash that took place in Holland in the 1600s.
Dudley responded by noting that central banks could consider offering cryptocurrencies as a substitute for cash "down the road," but before that could happen, the Federal Reserve would need to determine whether or not digital currencies were “a more efficient medium of exchange than cash.”
Replacing Cash With Crypto
Dudley didn't just focus on the Fed's potential relationship with crypto during his speaking engagements — he also gave attendees a word of warning about investing in the market. “I would be pretty cautionary [about bitcoin]," he said. "It’s not a stable store of value, and it doesn’t really have the characteristics that you’d like to have in a currency.”
Of course, not everyone shares this opinion. Apple co-founder Steve Wozniak told CNBC said he thinks bitcoin is a better standard of value than either gold or the U.S. dollar. Goldman Sachs, JPMorgan Chase, and other major financial institutions are all considering ways to get involved in crypto trading as well.
Whatever the future holds for crypto, the fact that Dudley was speaking about bitcoin and other alternative currencies in such a way is quite telling as it reveals that digital currencies have a mainstream potential many failed to see earlier in their existence. If bitcoin and other cryptocurrencies continue to climb in value, they just might become a permanent fixture in the world of finance.
Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.