According to New York Fed President William Dudley, a top U.S. central banker, the Federal Reserve is in the early stages of considering "what it would mean" to offer digital currencies and whether they may be necessary as an alternative to cash. Dudley's comments came after being questioned about Bitcoin during his participation in several recent;y scheduled public events.
Crytocurrencies have been attracting ever increasing interest as Bitcoin - the leading cryptocurrency - has been soaring in price, recently having exceeded $10,000 for the first time. Dudley says it's "premature" to be talking about the Federal Reserve offering digital currencies, like Bitcoin, "but it is something we are starting to think about - what would it mean to have a digital currency, what would it mean to offer it, do we actually need it."
"There [is] a possibility down the road that central banks could get more involved in offering digital currencies as a substitute for cash," he says. He adds that they are thinking about whether such currencies could be "a more efficient medium of exchange than cash."
On Bitcoin specifically, he's more cautious. "I would be pretty cautionary [about Bitcoin]," he says. "It's not a stable store of value and it doesn't really have the characteristics that you'd like to have in a currency."
Bitcoin has increased more than 10-fold in value so far this year, exceeding that of all other asset classes. This is occurring amid increasing speculation about the practical uses and demand for cryptocurrencies and related products like Ethereum, a public blockchain-based distributed computing platform featuring smart contract capability.
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