During an hour-long question-and-answer session, the Federal Reserve Bank of St. Louis – one of 12 regional banks that make up the U.S. central banking system – answered questions on Twitter with economist David Andolfatto, who is a vice president in the bank’s research division.
During the session, one user asked whether cryptocurrencies can be used to solve the 50-year-old Triffin Dilemma, which refers to the conflicting interests between national and global monetary policy for a country whose currency is used as the world’s reserve.
Specifically, it refers to the U.S. dollar, which has been considered a world reserve currency for decades. In order to maintain this role, the U.S. must incur a trade deficit.
When posed the Triffin Dilemma question, Andolfatto responded:
“The Triffin Dilemma refers to the double-edged sword of possessing a currency that serves as the world reserve currency. If a private cryptocurrency were to replace a given world reserve currency, this would eliminate the dilemma for that currency.”
Other questions asked during the session ranged from whether Andolfatto thought a cryptocurrency could replace the U.S. dollar or whether the Federal Reserve is likely to ever consider monetary policy in terms of cryptocurrencies.