John Berlau writes a letter-to-the-editor to The Wall Street Journal about the dangers of the U.S. government issuing its own digital currency.
After Kevin Warsh makes a convincing case that flawed government policies have contributed to cryptocurrency’s rapid rise in price, he inexplicably suggests that the Federal Reserve introduce its own digital currency (“The Meaning of Bitcoin’s Volatility,” op-ed, March 8).
Such a move would be harmful on many levels. It could crowd out innovative private cryptocurrencies that will improve the processing and remitting of payments. It could signal inflationary moves by the government, even if this isn’t the Fed’s intention. And it could create a new speculative bubble, as investors rush to buy currency they perceive as officially sanctioned and backed by the federal government.
The U.S. government issuing its own cryptocurrency would likely not be seen as a sign of stability, but as a desperate measure to prop up poor policies. Only the fierce discipline of the price-discovery mechanism of the private market can curb cryptocurrency’s volatility while harnessing its innovations.
Originally published at The Wall Street Journal.