St. Louis Fed President on Crypto: 'Currency Competition Is Nothing New'

James Bullard, president of the St. Louis Federal Reserve Bank, said Monday that cryptocurrencies "Are creating drift toward a non-uniform currency in the U.S.".

Bullard spoke on the history and economics of private currencies at CoinDesk's Consensus 2018 conference in New York, drawing on his work in this area.

U.S. history shows that currency competition often causes more problems than it solves, he contended.

In the 1830s, 90 percent of the currency in circulation was privately issued, with the uniform "Greenback" only coming into use during the Civil War.

With over 1,800 cryptocurrencies having been issued as of today, Bullard said there was a risk of drifting back towards that kind of "Chaos of exchange rates." Consumers could find themselves having to hold multiple forms of currencies for different transactions, he said, with each trading at a different relative price - not to mention the risk that a currency tanks, taking the consumer's savings with it.

"Currencies have to be reliable and hold their value," Bullard said, using the hyperinflationary Venezuelan bolivar as an example.

First, transactions using these currencies might be illegal.

There's no single world currency, Bullard said, and exchange rates even among major currencies can be volatile.

"The drift to a non-uniform currency could become a serious issue for the us if cryptocurrency reaches a large volume of trade."

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