On Tuesday night, the Vice President of the St. Louis Fed, David Andolfatto, presented a report titled BitCoin and Beyond: The Possibilities and Pitfalls of Virtual Currencies, referring to the crypto-currency as a “stroke of genius”.
Andolfatto presented a clear, objective and honest picture of the virtual currency landscape, as part of the district’s “Dialogue with the Fed” events series. The presentation included some noteworthy points, some of which are below:
“[Bitcoin is] a stroke of genius — a monetary system governed by a computer algorithm” that makes “low-cost banking available to anyone in the world” and is a “digital cash supply free of political manipulation.”
“Trust is still needed — location of trust is different.”
The current movement is an extension of a long tradition: “Hundreds of local currencies exist in US alone — New wave is an extension of this idea, combining the science of [cryptography] with the power of the Internet.”
Bitcoin might be a bubble but most asset classes like gold and US Treasuries have bubble components as well.
The failure of MtGox wasn’t Bitcoin’s fault.
Bitcoin might not be useful as a currency since unregulated, competing cryptocurrencies will likely experience “excess” volatility by design.
Another interesting statement even goes so far as to counter recent statements made by U.S. Senator Joe Manchin (D-W.Va.) urging a ban on Bitcoin:
BTC facilitates illicit activities but so does USD and gold — In any case, BTC also facilitates legal trading. Remember BTC transactions travel wallet-to-wallet, where wallet identities are disguised. In this sense, BTC is like USD cash in facilitating illegal trades. On the other hand wallet histories are publicly available (unlike USD cash transaction histories)”