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Philadelphia, PA — Privately issued currencies “can lead to unstable money supply and depreciation of the currency,” Philadelphia Fed President Patrick T. Harker said in a speech on Monday, citing new Philadelphia Fed research . He delivered the speech on fintech to the School of Engineering and Applied Science at the University of Pennsylvania.
“The underpinning of currency, like the financial system itself, is trust,” said Harker. “A fiat currency like that in the United States, which is issued by a central bank in a secure and stable economy, works because we trust it. A dollar is a dollar. We all agree that it is and there’s not much that can undermine that faith.”
Conversely, he noted, privately issued digital currency has “no fundamental guarantee of its value in the same way that there is with currency issued by the central bank of a credible and stable government. So, unless a government issues it... digital currencies won’t drive out our own any time soon.”
Harker noted that while some governments are exploring the idea of producing their own digital currencies, the U.S. faces several hurdles, repeating sentiments expressed by his colleague, Governor Jerome Powell, in a speech last month. Harker said those “include technical challenges, the unprecedented risk of cyberattacks, potential for criminal activity like money laundering, and threats to privacy.”