Not many of you probably noticed it, but last week, a new publication appeared on the website of the FED from St Louis: an introduction to bitcoin and cryptocurrencies.

Now, for those of you who are not familiar with the FED or Federal Reserve, it's basically the central bank in the U.S., which very simplistically, is responsible for important monetary policy decisions within the country that affect financial markets all over the world. 

Traditionally, Fed's position on cryptocurrencies has arguably been quite conservative, with Fed's Chair Janet Yellen (due to leave her office imminently) calling Bitcoin a "highly speculative asset" and "an unstable source of value" (1). Janet Yellen also declared that she did not see much benefit for the FED to introduce similar technology in US' financial system. 

The paper (2), published on the 11th of January, clearly indicates that the FED is slowing changing direction. Altough mentioning current scalability and volatility issues, thereby questioning the use case of cryptocurrencies as a payment method, the authors acknowledge that Blockchain-based tokens "can lead to the creation of a new asset class that can mature into a valuable portfolio diversification instrument". Now, that's a pretty big step towards cryptocurrencies' recognition. Not only is it a first official attempt of a major financial and regulation institution to educate citizens about cryptocurrencies, but it also raises the question of whether this is the very first step towards cryptocurrencies institutionalisation as an investment opportunity.

Is the FED - and other regulation institutions - gradually opening the doors of cryptocurrencies investments to wholesale and retail investors? The former are starting to access investment opportunities deriving from Bitcoin (Futures, e.g. with the CME) whereas the latter have to rely on exchanges to purchase cryptocurrencies and tokens - which are not always very transparent and occasionally fail to deliver high-quality services to investors (think of all the bugs, servers going down during peak trading times, vulnerability and hacking issues... just to mention a few). Is the FED telling us that "traditional" financial institutions will soon be able to start offering this kind of investment services? Exhanges are currently making a hell lot of money on trading fees after all... and in a low interest rates environment, investors are certainly eager to strive for higher yields....

Of course, any attempt to understand the future move of the FED basing on this publication is pure speculation. In the meantime, enjoy the advantages of the current lack of regulation around cryptocurrencies. But bear in mind the disadvantages...

Sources:

(1) Melloy, J., 13.12.2017 (CNBC): https://www.cnbc.com/2017/12/13/fed-chief-yellen-says-bitcoin-is-a-highly-speculative-asset.html

(2) Berentsen, A. and Schär, F., 11.01.2018 (FED of Saint Louis, Review): https://files.stlouisfed.org/files/htdocs/publications/review/2018/01/10/a-short-introduction-to-the-world-of-cryptocurrencies.pdf