Cryptocurrencies will not replace the U.S. dollar in the near future, according to the head of the St. Louis Federal Reserve Bank.
"Unless we screw up, I think the dollar is going to remain the dominant currency," James Bullard said at Consensus, CoinDesk's cryptocurrency-focused conference. "The dollar's in great shape today and will stay in great shape."
The dollar has been "the winner" in the currency competition for much of the last century, Bullard said, though he did acknowledge that cryptocurrencies might still have an impact in the global economy.
"We have to recognize that this is a new part of the currency competition game that hasn't existed in the past," Bullard told reporters. The problems facing the cryptocurrency industry right now are similar to those experienced by other currencies over the years, including volatility in prices and people arguing about the inherent value, or lack thereof, of those currencies.
If cryptocurrencies end up being viewed as actual currencies, their rise in popularity could create a drift toward non-uniform currency in the U.S., Bullard said. Not having a uniform currency has historically not fared well in the U.S.; the only reason Bullard believes non-uniformity has not become a bigger issue is that cryptocurrencies are not yet widely traded throughout the U.S. financial system.
The promise of cryptocurrency is that it might be able to protect citizens "against the vagaries of Venezuelan-type monetary policy," which has led to hyperinflation of the Venezuelan bolivar.
"If you've got a flagging nation-state currency, I could see cryptocurrencies coming into that situation," Bullard said at the conference.
The central bank seems consistent in its view that it will not explore a central bank-issued digital token. In November 2017, Fed Governor Lael Brainard called it "intellectual exercise" for the regulator.
Randal Quarles, the Federal Reserve's vice chairman for supervision, shortly thereafter urged central banks to "tread cautiously" as they debate issuing their own digital currencies. Such currencies are not good alternatives for the U.S. in the near term, he argued, saying that it is preferable to encourage innovations within the current system.
Although Bullard also repeated that there is no advantage to a central bank-issued digital token in the U.S. right now, central banks in smaller countries, some of which might be "laboratories of experiments," could explore such an option.