Insight & News

St. Louis Federal Reserve in Support of Bitcoin

By Bitcoin Exchange Guide News Team,
28 August 2018

The Federal Reserve Bank of St Louis is one of 12 regional Reserve Banks that make up the United States’ central bank. It openly welcomes Bitcoin and acknowledges it as a legitimate currency and as a tool to facilitate private transactions. Their support is quite surprising as cryptocurrencies were created so as to avoid the centralized banking system and allow one to acquire more control of personal transactions.

Role of Private Payments in Monetary Systems

Charles M. Kahn a research fellow at the Federal Reserve Bank of St. Louis wrote a report examining the role of private payments in monetary systems. Khan states that although payment privacy is an attraction for illegal transactions, it is needed for protection from malfeasance and negligence by counter-parties or by the payments system provider itself.

Cash is a simple, useful way to make legal transactions without revealing one’s identity. However, digital transactions are quickly replacing cash. but Khan states that this does not mean that the demand for private transactions will disappear.

Governments Introducing Their Own Digital Currencies

Many central banks are currently thinking of providing electronic money. Whether by choice or by increasing competition from private alternatives, it is not thought of as a good idea by the public. No one would ever believe that the government would create digital currency without any means to gain access to it.

Blockchain tech hubs have been popping up worldwide, such as the European Union’s February announcement of plans to open a Blockchain Observatory and Forum as well as New York’s May announcement of the opening of a Blockchain Resource Centre.

Khan states that:

“The replacement of cash by central bank electronic money is likely to spur demand for alternative means of payments to solve specific privacy problems.”


He continues:

“Privacy is the means to deprive counterparts of the information they need to carry out hidden actions and it is not necessary if there is no way for your counterpart to take advantage of the information he gets. There is a legitimate market for privacy of transactions. Bitcoin is in this market. The providers of stored value cards are in this market. To a certain extent, PayPal is in this market, as are the credit card companies with their tokenization programs for internet transactions. And government-provided currency is also in this market.”


The disadvantage of using third-party payment providers like PayPal and Credit cards is that they expose personal information to the system. Khan also wrote:

“One cool feature of Bitcoin is its ability to permit transactions across the internet while maintaining privacy from the Bitcoin system.”