‘Regulate it Out of Existence’: Nobel Economist Fails to Find a Purpose for Bitcoin [Again]

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Economist Joseph Stiglitz won the Nobel Prize in Economic Sciences in 2001 for analyzing markets with asymmetric information, but he can’t find a useful function for bitcoin. This according to a recent article in Business Insider, which cited the Nobel-winning economists from Davos, Switzerland at the 2018 World Ecomomic Forum in an interview with Bloomberg. While in 2001 he was able to prove that an imbalanced trade or deal could provide a glimpse into market forces such as unemployment, he fails to see the point of bitcoin except to circumvent the law.

The More Things Change, the More They Stay the Same

Stiglitz hasn’t wavered from his take on bitcoin a little over a year ago when he said that bitcoin was “exaggerated,” and that “the main use has been to circumvent tax authorities and regulation.”

Interesting how the more things change, the more they stay the same, as bitcoin has since  experienced unprecedented demand, a stratospheric rise in the price and innovations leading to new applications for the cryptocurrency, such as lending even to the unbanked, while Stiglitz, a Columbia University professor, hasn’t revised his views at all.

The Greater Divide

One of Stiglitz’s books is entitled: “The Great Divide: Unequal Societies and What We Can Do About Them,” taking aim at class warfare and inequality. While not perfect and not having escaped anti-money laundering efforts altogether, bitcoin at its best is designed for the social good and to bridge the gap between unequal societies, extending an olive branch to the unbanked and removing the friction from cross-border transactions among migrant workers, for instance. In a sense, by dismissing bitcoin, he is creating a “greater divide” within society and missing a solution that addresses the very inequality he fought against because the idea was not his own.

Stiglitz is taking a position that isn’t uncommon among policymakers and bankers, pitting centralized fiat money against cryptocurrencies despite the fact that many in the crypto community have said that there is room for both.

“We have a good medium of exchange called the dollar. We can trade in that. Why do people want bitcoin? For secrecy,” said Stiglitz to Bloomberg.

Meanwhile, as even blockchain pioneers such as Ripple’s Brad Garlinghouse favor some form of regulation, Stiglitz, who previously served as the World Bank’s top economist, suggests that regulating bitcoin would do more harm for the cryptocurrency cause than good.

“My feeling is that when you regulate it so that you couldn’t engage in money laundering and all these other things, there would be no demand for bitcoin,” he said. “So by regulating the abuses you are going to regulate it out of existence,” said Stiglitz, who next month turns 75.

A tweet from Pralahad Belavadi’s bot suggests that when economists finally demonstrate a “fear of missing out” and realize that the forces driving bitcoin are stronger than the forces against, bitcoin adoption will be complete.

That may be what this is all about, considering that when Stiglitz announced it was his decision to leave the World Bank as the chief economist nearly two decades ago, there was speculation that he was ousted.

Featured image from Flickr/IMF.

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