The whole world pays much attention to the cryptocurrencies and their increasing influence on the economics. Antoine Martin and Michael Lee, the NY Fed economists, keep an eye on bitcoin as well.
In the O&A posted on Fed’s official website, they discuss the utility of the most well-known world cryptocurrency. They confess that it won’t ever be as handy as fiat currencies that can be accessed in any bank. Economists also point out a few concerns around cryptos and bitcoin in particular. However, they don’t write it off completely and don’t dismiss its possible potential.
Though they decided to compare cryptos with fiat money, we should remember that virtual money are not always against fiat money. Even Brad Garlinghouse, the Ripple CEO, states that cryptocurrencies are not against the traditional type of money.
However, it seems that NY Fed specialists assume bitcoin will be compete with fiat money in future. But according to them, cryptos will unlikely gain trust and competitive ability that was always given by fiat money.
They think that bitcoin was worth people’s trust in an imaginary world. In the real one, people who are used to working with the already existing payment method and who know the value of money, hardly will trust bitcoin as a comfortable and easy payment system.
It’s usual for economic experts to compare traditional and innovative types of money, so let’s get to the details of their analysis.
Everyone can validate transaction in the anonymous crypto system, but its weakness is in the fact that a random attacker can control the half of a network power to cheat transactions.
The NY Fed experts believe that the further adoption of cryptos and bitcoin in particular will lead to its further growth. They even forecast that bitcoin may be compared to the US dollar that isn’t backed by commodities. Still, creating transactions in a trustless environment may be the problem without solving.
As a conclusion, we can admit that economists forgot to list the benefits of digital coins. For example, functioning in unbanked regions or payments throughout the world, between different countries. They noticed a high volatility in the crypto world caused by recent restricting the regulations in China, South Korea and other countries. These events are interfering the integration of cryptos into the financial and economic world.
However, there is a need to confess that bitcoin is a decentralized currency by its nature and was never thought to co-function with a centralized system. That’s why central bankers will be still frustrated by virtual coins in future.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.