What if some researchers for the U.S. Federal Reserve developed a report on Bitcoin that so disturbed the Fed governors that they hushed up the whole thing and disbanded the research team?
That crazy little piece of Bitcoin news recently turned up in the form of a first-person account of the episode as posted on Reddit.com.
While not giving a name, the person described himself (herself?) as "a trained economist with a B.S. in Computer Science, a M.S. in Operations Research, and a PhD in Econometrics" who was placed in charge of a research project on Bitcoin while working at the Fed's "major S.E. branch," presumably Atlanta.
It's unclear whether the person who posted the account did it for kicks or whether the whole thing is legit. He did say that he was going to disclose his identity to a trusted journalist, but so far no major news organization has put out such a story.
Still, the conclusions that this Fed research team supposedly reached resonate strongly with what many leading voices in the Bitcoin community, and to a lesser extent in the financial community, have been saying about the vast disruptive potential of the digital currency.
Here's what happened, according to this as-yet anonymous researcher.
The researcher says the Fed's Board of Governors asked his team to model the impact of Bitcoin should it evolve into a major currency. This involved "full simulations of money flows, interest rates, multi-currency derivative baskets, risk metrics, and their effects on global macro monetary policy and trade agreements."
What they discovered "was shocking," the researcher says. "Even with a mediocre adoption rate and variable growth rate, Bitcoin severely disrupts how we model, forecast, and ultimately understand currency interactions to make monetary policy decisions."
And the implications of that for the Fed are dire indeed.
"This is a huge technological, monetary, and policy disruption which leaves the Fed, the U.S. government, and other entities with much less control," the researcher says.
Once the report was complete, the team presented its findings to the board of governors. And they were not happy.
Fed Governors Get Some Scary Bitcoin News
Although the researcher says he is restricted by classified information nondisclosure agreements, he does share a little of what they allegedly told the board of governors.
"Our best case scenarios are modeled upon current Bitcoin adoption rates which have simulated a tipping point for the year 2026 (worst case 2021); this time frame projects the Fed (via the dollar) to lose its dominant global monetary policy maker status - instead everything will superseded by Bitcoin," he says.
Being told that it will soon become irrelevant apparently did not sit well with the board of governors, and were "highly alarmed" by the report. No further description of their reaction is given, although the researcher does note that he and his team were disbanded three weeks later and moved to other Fed offices.
Right now we have no way of knowing whether this account is true, but it does paint a credible scenario.
Most experts who have studied Bitcoin and where the technology might lead have come to similar conclusions. And it's not just avowed Bitcoin enthusiasts like venture capitalists talking up the digital currency.
Take Wedbush Securities analyst Gil Luria, for example.
"Bitcoin-related technologies will disrupt payments markets and other trust-based markets within the next few years and for decades to follow," Luria wrote in a May research report. "The disruption from Bitcoin will take longer than expected but have an even more profound impact than anticipated."
And in June, Deloitte University Press put out a report on Bitcoin warning people not to underestimate the digital currency.
"Bitcoin is more than just a new way to make purchases," the Deloitte report says. "It is a protocol for exchanging value over the Internet without an intermediary. Much has been written about the payment applications of Bitcoin, including remittances, micropayments, and donations. However, Bitcoin could soon disrupt other systems that rely on intermediaries, including transfer of property, execution of contracts, and identity management."
As for the Fed, who could blame them for being distressed at the news that their vaunted institution would, within a decade or so, be swept into the dustbin of history?
We'll stay on top of this story in case there are any new developments. But even if this particular account is never verified, what it says pretty much matches what we already know - that Bitcoin is destined to change how we think about and use money.
For more Bitcoin news and insights, follow me on Twitter @DavidGZeiler.
UP NEXT: Because the idea of a totally digital currency is still so new, many people naturally have questions about how to get started with Bitcoin and how to keep it secure. The good news is that it's less complicated than you think. With the basic tips in this infographic, anyone can get started with Bitcoin...
Related Articles:
- Reddit: Game Changer: Bitcoin Research at the Federal Reserve and How I've Lost My Job
- Deloitte University Press: Bitcoin: Fact. Fiction. Future
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.