Former Fed Ben Bernanke Comments on Cryptocurrency

Toronto is the backdrop for two payment technology conferences this week. Sibos 2017 represents international payments platform, SWIFT. An alternate conference, Swell, is being hosted at the same time and represents the challenger technology, Ripple. With an entire world of electronic payments up for grabs, the timing of these two conferences is interesting, to say the least.

While there is much that can be derived from analyzing the roster of speakers and topics addressed at each conference, the noteworthy speech by former Federal Reserve chairman Ben Bernanke stood out.

Although the Swell keynote delivered by Bernanke was filmed for private use only, some of his remarks regarding blockchain and cryptocurrency applications for interbank transfers have been reported: “It’s an obvious area where new technologies like blockchain or these electronic currencies can be used to improve the process.” Bernanke also provided a key insight into how central banks view cryptocurrencies like bitcoin, saying, “Bitcoin is meant to be an attempt to replace fiat currencies and evade government regulation and government intervention.” This echoes statements from JP Morgan CEO Jamie Dimon who recently stated that bitcoin as a currency would eventually be regulated on by central banks. Interestingly, both Bernanke and Dimon seem to recognize the value in the underlying blockchain technology that supports cryptocurrency.

Bernanke was asked after his keynote how bitcoin and other cryptocurrencies like Ether might be poised to affect the monetary policy of central banks. Bernanke reportedly said: “It could be a lack of imagination, but I don’t think monetary policy has changed that much. [Central banks] are supportive of these new technologies because they’ll improve the payment system ... but it won’t affect the ability of the Fed to require a certain amount of reserves,” remarked Bernanke about a central bank’s ability to curb inflation by altering interest rates.   

Bernanke had presided over the United States central bank during the 2008-09 international financial crisis and is currently a distinguished fellow in residence with the economic studies program at the Brookings Institution.