The Federal Reserve Bank of New York published an interview on its website on Friday, February 9, in which two economists discuss crypto-currencies, emphasizing their unreliable nature, but expressing doubt that the digital currency can ever “really compete with classical forms of payment” .
Michael Lee and Antoine Martin, both economists in the New York City Research and Statistics Group, took turns responding to questions about the basic concepts of crypto currency and financial confidence.
With the understanding that virtual currencies are not “provided with anything real”, for example, gold, Lee noted:
“You are right that they [virtual currencies] are not backed by a physical commodity, but not one dollar and most other modern currencies are also secured.”
Lee added that the trust in this currency is what gives it value in the payment environment and makes it “an acceptable medium of exchange.” In the case of crypto currency, this trust is not provided by any government or institution, but by Blockchain itself.
Crypto currency is the “future of money”?
Answering a question about whether the Crypto-currency will ever become the “future of money”, Martin expressed doubts, saying that the main problems of crypto-currency may actually not need to be addressed, at least not in “developed countries”.
He also refers to the lack of “convenience” and “extreme volatility” as factors that will keep the crypto currency from the main acceptance of it as a currency, noting that “people tend to trust financial institutions for processing payments and central banks to maintain the value of money.”
As Li himself noted in an interview, there is a feedback link between trust in the financial system and interest in Bitcoin. During the financial crisis in Greece in 2015, the number of transactions in the network reached a record high.
Disclaimer at the end of the interview makes it clear that the views of economists “do not necessarily reflect” the official position of the Federal Reserve Bank of New York or the Federal Reserve System as a whole