Regulations Will Be the Death of Bitcoin, Says Nobel Laureate Economist
Speaking with NBC’s Financial News on Monday, Columbia University professor and Nobel Prize-winning economist Joseph Stiglitz spoke disparagingly of Bitcoin and other cryptocurrencies. Among the interview’s biggest highlights are Stiglitz’s comments about the risks of Bitcoin’s anonymity and his assertion that regulatory agencies may possibly “use the hammer” to prevent cryptocurrencies’ further growth.
Governments are against the Anonymity of Bitcoin Transactions
Speaking first about Bitcoin’s anonymity, Stiglitz considers this feature to be a significant red flag as far mainstream adoption of Bitcoin is concerned. Stiglitz said:
“You cannot have a means of payment that is based on secrecy when you’re trying to create a transparent banking system. If you open up a hole like bitcoin, then all the nefarious activity will go through that hole, and no government can allow that.”
This argument falls flat, however, because a comprehensive study earlier in the year showed that money laundering activities constitute for less than one percent of all BTC transactions. Then, there is also the fact that Bitcoin transactions can indeed be traced. Privacy-centric coins like Zcash and Monero that have complete transactional anonymity aren’t nearly as widespread as Bitcoin.
Stricter Regulations will Make Bitcoin Useless
The 75-year old Economist also believes that more stringent regulatory guidelines will severely limit the utility of the top-ranked cryptocurrency. Speaking to Bloomberg earlier in the year, per NBC, he said:
My feeling is when you regulate it so you couldn’t engage in money laundering and all these other [crimes], there will be no demand for bitcoin. By regulating the abuses, you are going to regulate it out of existence. It exists because of the abuses.
Again, Stiglitz shows a lack of understanding of tokenomics and how it plays into the global business landscape. Companies are dedicating billions of dollars to create tools and platforms that will allow highly regulated trading of Bitcoin. In 2018 alone, Coinbase, Gemini, and even Goldman Sachs have made giant strides in that area.
Since the start of 2018, improved regulatory clarity has been identified as the next step in the evolution of Bitcoin and cryptocurrencies. Recently, the SEC classified Bitcoin and Ethereum as not being securities. There are indications that Bitcoin ETFs might be on the way as well.
Bitcoin Not Needed to Improve Global Payment Landscape
Finally, Stiglitz reiterated the need for a robust digital payment system but dismissed the need for Bitcoin saying:
I’d like us to move more towards an electronic payment [system] but you don’t need a bitcoin for that.
Unbanked and underbanked communities in Africa and Southeast Asia will have a thing or two to say about that. Many companies have used Bitcoin to bring improved remittance services to areas that have never had a banking presence.
Whether Stiglitz’s comments about future regulations have any truth to them remains to be seen. Regulatory uncertainty has been one of the primary factors influencing the recent downturn in the cryptocurrency market.
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