John Williams, who is New York?s Federal Reserve Bank?s incoming head, has said that bitcoin (BTC) as well as other digital currencies cannot serve as a replacement for the United States dollar since they do not qualify as currencies.
While speaking on CNBC Williams said that virtual coins don?t act as a store of value and thus they were disqualified as being currencies that were capable of replacing fiat currencies. Williams also listed other shortcomings that virtual currencies suffer from.
“The setup or institutional arrangement around bitcoin and other cryptocurrencies, first of all they have problems with fraud, problems with money laundering, terror financing. There’s a lot of problems there,” said Williams.
Store of value
Due to working for many years in central banking Williams admitted that made him biased with regards to cryptocurrencies. When the current president of the New York Fed, William Dudley exits in the next few weeks, Williams is expected to take over. Also of concern to Williams with regards to virtual currencies is their volatility as this predisposed them to being an unstable store of value. This also hampered their ability to become a medium of exchange where they can be used in the payment of goods and services.
The bearish stance of Williams is in stark contrast to that of Jerome Powell, the Federal Reserve Chairman who has described himself as not being a ?crypto-bear?. Last year in November Powell indicated that he had nothing against digital currencies though he said he had a cautious stance with regards to the risks that come with them including money laundering. However Powell pointed out that the Federal Reserve was neither broadly opposed to virtual currencies not broadly supportive of them.
Post-Tax Day rally
The remarks by Williams came as Bitcoin enjoyed a rally that started after the filing of tax returns. The post-Tax Day rally had been predicted by Tom Lee the co-founder of Fundstrat who had said that the price of the alternative currency would rise after April 17 following the sell-off which he blamed on the filing of taxes. Besides the tax day filings, Lee also attributed the change in sentiment to the fact that headline risks had started fading.
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