Editor’s note: This column was included in the Oct. 24 version of The Pulse, a weekly BankBeat newsletter sent to subscribers.
While at a meeting earlier this month, I sat in on a conversation with Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. During the Q&A portion, Kashkari faced the typical run of questions about FOMC decisions and election impacts on the economy. One exchange in particular caught my attention, in which an attendee questioned Kashkari about his views on cryptocurrency and artificial intelligence.
“Generative AI is very new, and every day people are innovating actual uses that you and I find useful in our daily lives,” he said. “Bitcoin is more than a dozen years old, and the enthusiasts are desperate to find some use case other than subverting the banking regulations. And nobody’s been able to come up with it.”
By a show of hands, well over half the people in the room had used AI in some form within the previous month. Only one attendee said they’d used cryptocurrency in that time, to repay someone they owed money, not as part of a transaction for goods or services.
Kashkari then recalled a conversation he had in which someone said they used cryptocurrency to send weapons to Ukraine because he couldn’t use his bank.
“I’ve grown deeply, deeply skeptical that after a dozen years, nobody can find a real legal use case for Bitcoin that the traditional banking sector cannot address, cannot solve,” Kashkari said. “On AI, I’m deeply enthusiastic because every day people are innovating new things.”
While he expressed caution about the potential for abuses — a necessary caveat, given AI’s role in things like deepfake fraud and scams — Kashkari was overall upbeat on AI’s potential benefits.
Asked about his position on the possible creation of a central bank digital currency, Kashkari echoed his cautious views on crypto. While advocates have posited a CBDC would help with financial inclusion or decrease the costs of cross-border remittances, he said he hasn’t seen evidence supporting those assertions.
“Let’s see what actual problem this [CBDC] is trying to solve. One of my observations is the private financial sector has actually come up with really remarkable innovations that meet most of our customers’ needs,” he said, citing the ability of services like Venmo or PayPal to easily transfer $5 between consumers. “What actually is it that this central bank digital currency can solve?”
It seems like 80 percent of the press releases and story pitches I get these days feature an AI or crypto angle — or both. When considering where to spend our editorial efforts, filtering out the baseless hype from what has true potential has been a crucial skill.