The Federal Advisory Council (FAC), an adviser to the Board of Governors of the Federal Reserve System, has published a new document (PDF) that entails bitcoin. Many in the bitcoin community are speculating that this is the first step by the central bank to mull over imposing regulations on the peer-to-peer decentralized virtual currency.
The report, which also consists of other issues such as student loans and consumer borrowing, monetary policy and current banking market conditions, poses the question: “Does Bitcoin pose a threat to the banking system, economic activity, or financial stability?” The primary concerns that the Fed council had were bitcoin’s involvement in banking and economic activity and the financial stability of the digital currency.
According to its findings, the cryptocurrency does not threaten the present banking system, but it could very well become a significant factor to payment processors because of its low fees and lack of regulation that could force the industry to adapt to.
One of the reasons why the Council isn’t concerned about bitcoin being a hazard to the financial community is because it represents only a small fraction of global fund flows. Another hindrance to global adoption is security worries that consumers might have.
“Consumers are likely to use Bitcoin if they perceive its benefits – namely faster settlement and geographic flexibility – to exceed those of its alternatives,” the FAC stated. “If this were to happen we could see multi-currency accounts at traditional institutions.”
It made a brief mention about the virtual currency being affiliated with illicit transactions. However, the FAC said that criminal activity only accounts for a fraction of what bitcoins are transacted for.
Overall, it believes bitcoin will become a lot more stable in the future and consumer regulations will eventually be instituted. Also, the FAC views bitcoin as a potential “boon” for the economy because of “[Bitcoin’s] global transmissibility opens new markets to merchants and service providers.”
