It looks like the testimony will not be subtle at the Senate Banking Committee today entitled: Exploring the Cryptocurrency and Blockchain Ecosystem.
Peter Van Valkenburgh, Director Of Research at Coin Center, spends his time trying to explain blockchain by calling it decentralized computing. I’m going to guess that his presentation falls on ears that have no idea what he’s talking about.
Nouriel Roubini, Professor of Economics at the Stern School of Business at New York University, is much less subtle. He titles his testimony:
Crypto is the Mother of All Scams and (Now Busted) Bubbles While Blockchain Is The Most Over-Hyped Technology Ever, No Better than a Spreadsheet/Database.
Actually calling this useless vaporware garbage a “shitcoin” is a grave insult to manure that is a most useful, precious and productive good as a fertilizer in agriculture.
He goes on to attack the premise of cryptocurrency. Financial crises happened before fiat currencies and central banking. There were many bubbles and busts before central banking. We all note tulipmania. He takes the position that central banking helps avoid currency runs that occur when a bubble bursts. It may be hard to make this point when the wounds of the 2008 financial crisis still feel fresh.
Professor Roubini also points out the environmental consequences of cryptocurrency. He cites a figure of $5 billion a year spend on energy costs.
My personal take on bitcoins and other cryptocurrency is that they have been a boon to criminals and money laundering. The loose attitude for the exchanges on reporting suspicious transactions has been a boon for moving illegal money around from person to person and laundering it back into the legitimate money system.
Then add in the pump and dump mechanisms of other smaller coin ecosystems, you have fraudsters getting money from ICOs. More money when they fraudulently prop them up, then use them to transmit the proceeds outside the legitimate banking system.
Last night, the International Monetary Fund warned that cryptocurrencies “could create new vulnerabilities in the international financial system.” Cryptocurrency valuations crashed as a result.
You can also add in the “whales” of Bitcoin when talking about stability. Thirty-two Bitcoin wallets collectively own about 1 million bitcoin (i.e 5% of all bitcoins). Five of those wallets are lost. The owner lost the private key and cannot access the accounts. That represents 212,000 coins worth about $1.3 billion. That to me, is an incredible concentration in ownership that can’t lead to anything good.