Ken Rogoff: Possibility of cryptocurrency taking over fiat money is basically zero
Representations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are seen on a PC motherboard in this illustration picture, February 13, 2018. REUTERS/Dado Ruvic/Illustration/File Photo
Cryptocurrencies have had a wild ride over the last year.
On a World Economic Forum (WEF) panel called Building a Sustainable Crypto-Architecture in Davos, Switzerland, one of the world’s most prominent economics professors said cryptocurrency is “a classic bubble.
“I think its transparently a bubble and there will be many papers on it,” said Ken Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics, Harvard University.
After surging by 1,000% against dollar in 2017, bitcoin’s valuation then crashed by over 70% since then. The volatility of the unregulated cryptos have caught the watchdogs’ eyes, especially as inexperienced investors bought into the rally in the hopes of making big returns, rather than for any fundamental belief in bitcoin as an asset or technology.
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In November last year, the US Securities and Exchange Commission took enforcement action against crypto crowdfunding projects, the US Justice department launched an investigation into possible bitcoin price rigging, and later last year there were claims that hundreds of thousands of crypto miners were going out of business due to the price slump.
Rogoff has likened investing in crypto currencies as nothing more than a lottery ticket. On the panel, after discussing the wild swings of bitcoin for example, his anecdote about his child and bitcoin summarised how unpredictable the market is.
“In 2012, my daughter who was 13 at the time, mined 24 bitcoin and owned them. She told me that someone had offered her an Amazon giftcard and what should she do. I told her to sell,” said Rogoff.
He added that “I think the possibility of a cryptocurrency taking over fiat money — like dollars and pounds — is basically zero. In the history of currency, the private sector advanced everything.
Using examples ranging from the biblical era use of coins to how China developed paper money several times over, he emphasises how fiat currency will always be developed, regulated, and aggregated by the public.
“I promise you that’s the endgame here. I think if you take the crypto out of the cryptocurrency, so you can do anonymous transactions, there’s just not value-added compared to fiat,” said Rogoff.
“I want to be clear though, I don’t think [cryptocurrencies] are worthless.” He said they would have some use in a dystopian future — something he has said before.