By CCN.com: Nobel-Prize winning economist Joseph Stiglitz believes that cryptocurrencies need to be shut down. Demonstrating precisely zero knowledge of the concept of peer-to-peer networks, he told CNBC that he “actually [thinks] we should shut down the cryptocurrencies.”
Transparency Good, Bitcoin Bad
Stiglitz claims he supports digital payment systems because they would help with regulation, saying:
“I’ve been a great advocate of moving to an electronic payments mechanism. There are a lot of efficiencies. I think we can actually have a better-regulated economy if we had all the data in real time, knowing what people are spending.”
Lack of privacy and potential for improved surveillance are a sticking point among cryptocurrency enthusiasts. Plenty of people believe that privacy coins such as Monero and Zcash will eventually be the dominant mode, while privacy innovations in Bitcoin such as CoinJoin have seen a massive increase in usage.
Stiglitz was one of three people to earn the Nobel prize for economics in 2001. He, Michael Spence, and George Akerlof won the award “for their analysis of markets with asymmetric information.” The official reason given for his prize reads:
“Joseph Stiglitz clarified [a] type of market adjustment, where poorly informed agents extract information from the better informed, such as the screening performed by insurance companies dividing customers into risk classes by offering a menu of contracts where higher deductibles can be exchanged for significantly lower premiums. In a number of contributions about different markets, Stiglitz has shown that asymmetric information can provide the key to understanding many observed market phenomena, including unemployment and credit rationing.”
His Nobel prize has nothing to do with digital payments or cryptography, but the opinion of a respected economist will be taken seriously by the likes of government regulators.
A crypto economist by the name of Saifedean Ammous recently said that governments attempting to shut down Bitcoin would be the best thing for it.
In effect, since the peer-to-peer network is nearly impossible to shut down (without significant changes to the national infrastructures, such as the kill switch in Russia), government pushes to “kill” cryptocurrency will ultimately make it more popular.
By nature, any government that sought to shut down cryptocurrency would be financially restrictive in all the ways that create demand for it.
The economist has weighed in on the bitcoin ‘kill switch’ in the past, falsely claiming the US government has shut down bitcoin.
— CCN Markets (@CCNMarkets) September 7, 2016
While it’s not impossible to shut down crypto by force, the resources required are significant, and ultimately it creates an unprecedented black market. Ammous argues that if governments want to kill cryptocurrency, they should find a way to compete with it and eventually make it obsolete.
This is a tall order since most cryptocurrencies are either deflationary or anti-inflationary, but it’s certainly conceivable and, potentially, a more palatable future than a hyper-Bitcoin one, which currently favors early adopters by a factor of many thousands to one.
US Government Issued Stablecoin, Coming to an Economic Thesis Near You
Stiglitz makes an argument for the transparency of blockchain economies, saying that if government had access to financial data in real time, they could more accurately set interest rates. An additional benefit, he believes, is the ability to thwart “illicit” transactions.
He then says:
“It disturbed me a great deal the attention that was being given to cryptocurrencies because those are moving things off of a transparent platform into a dark platform. […] We know from research […] the large percentage of global wealth that is held in these dark havens. If we want a more efficient economy without these illicit activities, I think we’re going to have to move to more of an electronic payments mechanism. We will have to figure a way out to have the transparency of an electronics payment system without the dangers of the surveillance state.”
Stiglitz then inadvertently makes a case for a government-issued stablecoin, which would, of course, nullify the existence of privately-issued stablecoins.
“We have a very good currency. […] There is no need for anybody to go to a cryptocurrency. […] We talk about the attributes of a good currency and the US dollar has all those attributes. The cryptocurrencies do not have those attributes. I actually think we should shutdown the cryptocurrency.”
It’s not a matter of time, it’s a matter of timing when it comes to cryptocurrencies. Currently, many would agree with Stiglitz assessment that the dollar serves most of its intended purposes. When Bitcoin emerged, however, the financial system backing the dollar was in a state of chaos breaching the point of absurdity. The fallible human nature of centralized systems is a force to be reckoned with, and cryptocurrencies gain the best kind of popularity as they stumble.