HOME INSIGHTS SCENE FORMER US CENTRAL BANK GOVERNOR BELIEVES IN CENTRAL CRYPTO CURRENCY
The former Governor of the US Federal Reserve Kevin Warsh believes in the potential of crypto currencies for central banks. In an interview with the New York Times, he praised the innovative power that these currencies would bring. According to Warsh, although digital currencies are currently affected by strong fluctuations in value, they could still be used to a greater extent with the help of more decisive research. He also brought the issue of the US Federal Reserve’s own crypto currency back into play. If he were still a member of the leadership, he would launch such a “Fedcoin”.
Usually it’s the voices from the end that make the loudest noise. Kevin Marsh, who held one of the twelve governorships of the US Federal Reserve from 2006 to 2011, also showed this last week. In an interview with the New York Times on Friday, he called on the U.S.
Federal Reserve to become more involved in crypto-currencies, contrary to its current direction
One such possibility would be the release of a crypto currency centrally controlled by the US authorities. Warsh is thus bringing the “Fedcoin”, initiated last year by the New York Federal Reserve, back into play. The current head of the central bank Jerome Powell, however, thinks little of crypto currencies.
If he were still part of the leadership of the Washington authorities, he would have long drawn attention to “the Fed issuing a Fedcoin,” Warsh said, “Not that this cash would displace and replace, but it would be an effective way to conduct monetary policy in the event of the next crisis.
According to Warsh, the world of central banks is divided into those who find crypto currencies either “cool” or “risky”. Nevertheless, central banks would have to make much more decisive efforts and exploit their potential.
For this to succeed and for digital currencies to become reliable means of payment, it would also be necessary to adapt the existing legal framework and integrate crypto currencies into its system.
“Congress has given the central bank a monopoly on money. And if the next generation of crypto currencies looks more like money and less like gold – and there will be less volatility associated with them, so that they do not become a purely speculative investment but reliable means of payment – I would not want anyone to take this monopoly away from me as a matter of principle, the 48-year-old predicts the US Federal Reserve’s coming control claims.
Already in March, the current lecturer at Stanford University had presented the advantages of Bitcoin in a guest article in the Wall Street Journal. Nevertheless it had reminded, all crypto currencies could end in the future worthless .
US Federal Reserve wants to use blockchain for payment transactions
In addition to crypto currencies, Warsh also highlighted the potential of the blockchain for central bank activities in a report published this week. As with interbank transactions, there are a number of application areas for which the US Federal Reserve can use the technology.
Unlike crypto currencies, this attitude does not contradict his former employer. This is because the current head of the Federal Reserve and former Warsh competitor Powell has already expressed several positive opinions on distributed ledger technologies in the past.
“At the moment we understand the blockchain as something that can have a decisive application in the payment traffic of the economy”, says Powell.
Until last year, Warsh himself was regarded as a hot contender for the post of chairman of the central bank. US President Trump, whom he had advised on economic issues prior to his election as president, was, however, a thorn in his side. In his opinion, Warsh was “too young to be taken seriously by the markets in the event of a renewed financial crisis”.
Observers found this reasoning inappropriate, as Warsh had already shared responsibility for the fate of the central bank during the 2008 financial crisis.