The real value of blockchain technology is in authentication, not in distributing digital currency, Patrick T. Harker, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia, said recently.
Speaking at the University of Pennsylvania School of Engineering and Applied Science Technology, Harker primarily focused on financial technology or “FinTech” along with providing economic update and outlook.
Harker noted the increasing interest in digital currencies but believes that they would not be able to drive out fiat currencies as they are not backed by any government or central bank. He also pointed out the highly unstable nature of digital currencies, saying “one of the things you’ll see with digital currency is how wildly the value swings. The question is will there ever be a digital currency that is stable enough to become as widely used as a government one.”
“So, unless a government issues it, the answer is likely that no, digital currencies won’t drive out our own any time soon. And while some governments are exploring the possibility of producing their own digital currencies, several hurdles remain, as my colleague, Governor Powell, outlined recently. Those include technical challenges, the unprecedented risk of cyberattacks, potential for criminal activity like money laundering, and threats to privacy”, he said.
The Fed President, however, sees huge potential in blockchain – the technology that underpins digital currency such as bitcoin. He said:
“Blockchain has tremendous potential and banks can use it to further manage risk. From my perspective, however, its real value is in authentication, not on distributing a virtual currency. And the implications of having a distributed ledger that offers virtually failsafe data storage are huge on the risk management side for any business.”
