During a February 22, 2018 press briefing on the progress of recovery efforts in Puerto Rico and the U.S. Virgin Islands since last year’s hurricanes, Federal Reserve Bank of New York President William Dudley cautioned that investing in privately issued digital currencies such as bitcoin could result in significant financial losses for those involved. His remarks came in the context of responding to a question about cryptocurrency advocates setting up shop in Puerto Rico’s economy.
“There is a bit of a, I would say, speculative mania around cryptocurrencies in terms of their valuations, which I view as pretty dangerous, because I don’t really see what the actual true underlying value of some of these cryptocurrencies actually is in practice,” Dudley stated. For privately issued digital currency, “it’s essentially what people think it’s worth, which seems to me somewhat dangerous,” he stated.
According to data from the website CoinMarketCap, all private digital currencies now total just shy of $450 billion, compared with Federal Reserve data that shows there is approximately $1.6 trillion in U.S. currency in circulation. During the past year, bitcoin’s price has ranged from a low of $945.59 on March 20, 2017, to a high of $19,501.03 on December 18, 2017. Its value currently stands at just under $10,000.
Dudley’s remarks added to a series of recent central bankers’ warnings and cautions on the issue, after a volatile period for digital currency. Earlier this month, European Central Bank President Mario Draghi stated that digital currencies should be regarded as “very risky assets.” According to Reuters, Bank of England Governor Mark Carney reportedly commented earlier this week that bitcoin “had pretty much failed thus far” as a form of money. We previously reported on a speech given by Federal Reserve Vice Chairman for Supervision Randal Quarles in November, in which he stated that “[w]hile these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage.” Quarles also opined that, in his view, the alternative to privately issued digital currency in the United States is not necessarily a publicly issued digital currency. Rather, he would like to enhancements and improvements to the banking system’s services so that the United States could have a “real-time payment system that would allow banks and their customers to make transfers and settlements of funds across the banking system instantly, conveniently, and securely all the time.”