The Federal Reserve and European Central Bank should be given a mandate to monitor threats bitcoin and digital currency systems pose to the broader financial system, a new report from a Suffolk University researcher argues.
Entitled “$=€=Bitcoin?”, the report speculates as to the potential dangers that the more widespread use of bitcoin as a digital money with no government backing, analyzing how circumstances arise where this threatens national and international economies.
The paper follows a February 2014 statement from Federal Reserve chairwoman Janet Yellen, who said that the US central bank does have the authority to regulate digital currencies. Further, the European Central Bank published a report last year that, while largely dismissive the technology, indicated the bank is monitoring developments.
More broadly, the report argues that the mandate is necessary given that the general population is not aware of central bank boundaries, meaning the central bank could “bear responsibility” for a systemic crash should it affect either or both markets.
The report reads:
“Even if the central bank had no mandate to regulate virtual currencies, a failure of a widely-used virtual currency could imperil confidence in the central bank, which could adversely affect its ability to govern