Federal Reserve Bank Vice President is optimistic about Bitcoin, as an alternative currency. See, how does Bitcoin affect emerging market monetary policy.

14 February, AtoZForex – Federal Reserve Bank of St. Louis Vice President, Dr. David Andolfatto, is positive about Bitcoin, as an alternative currency could execute limitations on the ability of governments to raise revenue through money making.

Bitcoin affect emerging market monetary policy

In some countries, the ability for a central bank to print money is a significant source of revenue for the government. But it’s not the case of developed countries like U.S or the Great Britain. Moreover, in underdeveloped countries, where the tax system is not so advance, an alternative to collecting taxes is through the inflation tax.

Federal Reserve Bank of St. Louis Vice President, Dr. David Andolfatto commented

“If a government does it to build a hospital for sick children, it’s arguably a good thing.” “If it does it for military hardware for evil friends, it’s probably bad. Either way, if a government finds itself fiscally constrained, it’s going to want to start printing money at a faster and faster rate. 10 percent in the first year, then 20 percent a year, 30 percent, and so on. At those rates, it becomes costly to hold cash because it’s losing its purchasing power very rapidly”.

Moreover, if central bank and government understand the threat of this currency substitution, they are not likely to surge inflation rate. They will keep the inflation rate lower. Furthermore, the less inflation tax revenue could dump the bolivar and substitute with bitcoin. Also, he believes Bitcoin could promote central bank moderation in fiscally strained countries. Hence, the Bitcoin could have implications for central bank policies in other jurisdictions in the developing world.

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