There has been endless speculation regarding the long-term future of cryptocurrencies and if they will provide any relevant benefits to the mass consumer populace. The virtues of Bitcoin will be extolled at a conference then spoken about with unstinting suspicion in private by the same economist.
Now, one federal economist has given support to cryptocurrency in an unexpected appraisal. Speaking in an interview with Business Insider, St Louis Fed Economist David Andolfatto suggested that digital currencies really do provide healthy competition for the US dollar.
“I do think its existence as a threat is very good: It will discipline the Fed and other central banks to continue to run responsible policies — if they don’t, people could switch to something else,” he said.
This comes in light of Andolfatto’s presentation on Bitcoin to the public on 1 April as part of the St. Louis’ ‘Dialogue with the Fed’ series of events, which Cointelegraph reported on last week.
This was significant not just because Andolfatto was the first official to become publicly involved with cryptocurrency but also because of his frank and honest opinions regarding the financial establishment’s policy towards their development.
“If a central bank, a government, knew people could stop using domestic currency and flock to an alternative, that would force the government to behave more responsibly,” he remarked, speaking about the potential for foreign governments to lose their grip on the tight currency controls in place in some nations, such as Albania.
While this of course does not apply to more liberalized economies such as the US, Andolfato alludes to “other technologies looming out there” which “might discipline central banks”.
Although no expert predicts a dynamic shift of consumer trust to cryptocurrencies in the near future, and Andolfatto himself has not thus far invested in Bitcoin for reasons of financial volatility, the fact that small meltdowns, such as the expiration of the most popular exchange Mt Gox, have not thus far dented this official’s confidence in its essential viability can be seen as a huge boost to the industry:
“I would not want to put in my life savings. It's usually volatile. You could get lucky, but you'd have to be careful. Let’s see how it evolves.”
Expert's opinion from Mathew Slater: "Andolfatto is not a policy maker. He appreciates bitcoin for what it is - a distibuted payment system. Banks and inter-bank systems are very complex and expensive to design, maintain and audit. The government never said BTC wasn't genius, it said BTC wasn't money."