San Francisco Federal Reserve Bank CEO John C. Williams, has stated at a recent FinTech conference that Bitcoin will facilitate crime and money laundering, despite there being very little evidence to back up these claims.
SF Federal Reserve Bank CEO on Bitcoin
The power and potential pitfalls of FinTech were discussed at the recent Lendit USA 2016 Conference. This presentation was given by John C. Williams, President, and CEO of the Federal Reserve Bank of San Francisco. As most people are well aware, FinTech startups are actively collaborating with the banking industry, as both parties stand to gain from such partnerships.
John C. Williams started his talk with a very positive note:
I’m excited by the innovation I’m seeing in financial technology—much of it from people here today. But it’s also why I’m going to raise some potential risks. […] we have to look not just at what’s possible in the sense of wonder and limitless options, but at what’s possible in the sense of the economist’s greatest concern: the unintended consequence.
After touching upon various aspects of FinTech and how this industry can revolutionize the payments industry on a large scale, the discussion turned to Bitcoin and digital currencies. Williams mentioned how these currencies are “easy to use and anonymous,” which is not true for every digital currency in existence today. Bitcoin, for example, is not as anonymous as some people think, and its ease-of-use can be a point of debate as well.
Moreover, the Federal Reserve Bank CEO feels these digital currencies make criminal and terrorist activities even easier. It is not the first time allegations were directed at Bitcoin for terrorism funding, although there’s no tangible proof cryptocurrency is preferred over cash for this purpose. Granted, one underage IS supporter was arrested last year for promoting Bitcoin donations to fund IS in their “war.”
It seems this stance against Bitcoin and digital currencies stems forth from a lack of understanding of how the protocol works in the first place. While Bitcoin can be used pseudonymously on a global scale online much like email, every transaction is visible to everyone on its public ledger making it more transparent than using cash, for example. Moreover, the Panama Papers recently revealed the scale of the money laundering taking place through established financial institutions, tax havens, using money issued by governments and central banks like the Federal Reserve.
Innovation Matters Despite Risks
Despite all of these negative comments on Bitcoin and digital currencies, Williams concluded his talk by saying:
I’m not suggesting that the spirit of innovation is in any way nefarious, nor do I claim that people haven’t considered risk of their own volition. But as I said earlier, this is about unintended consequences. In summary, there’s no question that fintech is going to change the face of financial services on a global scale.
While it is positive to see this Federal Reserve Bank official acknowledge the potential of Fintech on a global scale, it will all come down to the regulatory framework as far as innovation is concerned. Over-regulating FinTech and digital currency will hamper growth and innovation while leaving things unattended is not the right way to go either. FinTech and digital currency industry leaders need to put their foot down and demand to be heard by regulators and government officials to create a solution that works for everyone.
What are your thoughts on the Federal Reserve Bank President’s stance on Bitcoin and digital currency? Will innovation be stifled, or will the tide turn? Let us know in the comments below!
Images courtesy of Federal Reserve Bank, John C. Williams, Shutterstock, businessinsider.com