Cryptocurrencies could serve as a possible solution to disparities currently faced by the U.S. dollar, an economist with the Federal Reserve Bank of St. Louis said Tuesday.
During an hour-long question-and-answer session, the Federal Reserve Bank of St. Louis – one of 12 regional banks that make up the U.S. central banking system – answered questions on Twitter with economist David Andolfatto, who is a vice president in the bank's research division.
Specifically, it refers to the U.S. dollar, which has been considered a world reserve currency for decades. In order to maintain this role, the U.S. must incur a trade deficit.
When posed the Triffin Dilemma question, Andolfatto responded:
Other questions asked during the session ranged from whether Andolfatto thought a cryptocurrency could replace the U.S. dollar or whether the Federal Reserve is likely to ever consider monetary policy in terms of cryptocurrencies.
Moreover, because there is "no need for decentralized consensus based record keeping" for the dollar, he does not see it being replaced with a cryptocurrency.
Andolfatto also does not see the demand for cryptocurrencies supplanting the demand for existing reserve currencies, he added.
Federal reserve logo via Shutterstock
Read more about
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.