James Bullard, president of the US Federal Reserve in St. Louis, told CNBC on Tuesday that increasing interest in Bitcoin does not pose a serious threat to the US dollar as the world's reserve currency.
"I just think that for Fed policy it will be a dollar economy as far as the eye can see – a dollar global economy as far as the eye can see – and whether the gold price goes up or down or the bitcoin price goes up or down, doesn't really affect it, "Bullard said on Squawk Box.
Bitcoin in particular was advocated by Crypto Bulls as a store of value for hedging against inflation or the devaluation of fiat currencies such as the dollar. Some have touted it as "digital gold". In addition, Bitcoin and other cryptocurrencies also offer themselves as a way to buy goods and services like real money.
Bullard, who has headed the St. Louis Fed since 2008, raised concerns about widespread transactions in a number of non-government cryptocurrencies. "Dollars can already be traded electronically, so I'm not sure this is really the problem. The problem is privately issued currency," he said.
Before the Civil War, it was common for banks to issue their own banknotes, Bullard said. He compared it to Bank of America, JPMorgan, and Wells Fargo, all of which had different brands of dollars. "They were all trading around and they were trading at different discounts and people didn't like it at all," he said.
"I think the same thing would happen to Bitcoin here," Bullard said. "You don't want to go to an uneven currency that you go to Starbucks in, and maybe you pay with Ethereum, maybe you pay with ripple, maybe you pay with bitcoin, maybe you pay with a dollar. We don't do it that way. We have a single currency that was introduced at the time of the civil war. "
Bullard's comments came shortly after the price of Bitcoin dwarfed $ 50,000 per coin for the first time. The latest tier for Bitcoin follows the steps of established financial firms like BNY Mellon and Mastercard into the crypto space.
Tesla also announced last week it had bought $ 1.5 billion worth of Bitcoin with cash on its balance sheet and planned to accept the digital coin as payment for its products. The electric vehicle maker's move has been seen by some as yet another important step in the widespread adoption of Bitcoin, the world's largest digital currency by market value.
While Uber has no plans to buy Bitcoin as an investment, CEO Dara Khosrowshahi said it was possible the hailstones and grocery delivery company would eventually allow customers to pay with digital coins. "Just as we accept all kinds of local currencies, we will look at cryptocurrency and / or bitcoin in terms of the currency to be treated," Khosrowshahi told CNBC on Thursday. "We'll definitely look at that and if there's an advantage there, if there's a need, we'll do it. We just won't do it as part of a promotion."
In considering whether cryptocurrencies pose a threat to the dollar, Bullard insisted that the competition was nothing new. It's something that has been going on for centuries, he said. "It's currency competition, and investors want a safe haven. They want a stable store of value and then they want to invest in that currency," said the St. Louis Fed President.
For example, he claimed that both the euro and the yen are strong currencies. "None of these will replace the dollar, however," he said. "It would be very difficult to get a private currency that is really more like gold to play that role. I don't think we'll see any changes in the future."