Posted by Yacheng Xu.
Federal Reserve Bank of New York President William Dudley “warned that investing in privately issued digital money such as bitcoin could end in big financial losses for those involved.” He opined, “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.”
The Fed’s vice chairman for supervision, Randal Quarles, said, “While 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.”
From my perspective, with the gaining popularity of cryptocurrency like Bitcoin, more risks such as hacking and scandals will in crease. Bitcoin proves to be a highly speculative asset. Nevertheless, the Fed failed to enforce any rules, and the SEC merely issued some warnings regarding Bitcoin and future ICOs. The cryptocurrency is basically free of government regulations, which easily can trigger an investment bubble, illegal fund-raising, and undermining the market economy. Hence, in China, the government has shut down the cryptocurrency exchanges in September, 2017 and prohibit new ICOs.
It is indisputable that the virtual money is a great way to avoid the control by a central bank. Given the pros and cons of cryptocurrency, we should have a compromise solution, allowing the existence of exchanges but setting regulations at the same time.
Yacheng is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2019.