Fed’s Quarles warns that digital currencies like bitcoin pose ‘serious financial stability issues’ as they grow

Bitcoin and other cryptocurrencies pose greater danger to the financial system as they become more popular, new Federal Reserve Governor Randal Quarles warned in a speech Thursday.

On the same day bitcoin prices plunged after a massive rally, the central bank official cautioned about the growth that digital currencies have seen and the destabilizing effect they could pose in times of liquidity stress.

“While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage,” Quarles said, according to prepared remarks from a speech he is delivering in Washington.

Quarles said that if digital currencies can’t be exchanged at a stable rate for dollars during difficult times, “the resulting price risk and potential liquidity and credit risk pose a large challenge for the system.”

Bitcoin’s price crossed $11,000 Wednesday before retreating Thursday for a drop that exceeded 5 percent at one point.

Quarles mentioned bitcoin specifically once in the speech, keeping his remarks to the broader world of digital currencies…

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