Authorities will bring down 'hammer' on bitcoin: Nobel-winning economist said
Critics, however, voice concerns regarding adopting a mostly unregulated financial asset that can be used anonymously and has no central authority.
Nobel prize-winning economic expert and columbia university professor Joseph Stiglitz is among those critics.
Although the ledger of transactions that has taken place on the blockchain is public, Stiglitz says the anonymity of bitcoin opens the door for criminal enterprises.
"You cannot have a means of payment that is based on secrecy when you’re trying to create a transparent banking system," Stiglitz, 75, told the financial News monday. "If you open up a hole like bitcoin, then all the nefarious activity will go through that hole, and no government can allow that.”
Although the cryptocurrency market nowadays is little, Stiglitz says its growth can quickly bring regulation from authorities: “Once it becomes significant they'll use the hammer.”
Indeed, the U.S. Securities and Exchange Commission has begun to scrutinize the market, while regulators around the world are also making policies to handle cryptocurrency exchanges.
In fact, Stiglitz has told more regulation of bitcoin will render it useless. "My feeling is when you regulate it so you could not have interaction in money laundering and all these other [crimes], there'll be no demand for bitcoin," he told Bloomberg in Jan. "By regulating the abuses, you're progressing to regulate it out of existence. It exists because of the abuses."
Some financial institutions appear to disagree: In May, Goldman Sachs declared plans to open a bitcoin trading operation, which can lead other banks to follow. In June, prominent Silicon Valley venture capital firm Andreessen horowitz declared it'd launch a fund entirely dedicated to cryptocurrency technical school. And U.K. bank Barclays inked a deal to support Coinbase, one of the world's largest cryptocurrency exchanges, in March.
In comments that some might construe as ageist, bitcoin investors Tyler and Cameron Winklevoss, 37, told CNBC in February that the technology is something an older generation might not understand. in addition to Stiglitz, financial stalwarts such as Warren Buffett, International monetary fund head Christine Lagarde and J.P. Morgan ceo Jamie Dimon have all criticized bitcoin. so has Microsoft billionaire Bill Gates.
"The criticisms are simply a failure of the imagination," said Tyler Winklevoss.
Previously, Stiglitz has argued in favor of the U.S. moving transactions and payments to a more digital system that's open and clear.
"There is a international framework for each corruption and tax evasion and tax avoidance," he said at the globe Economic Forum's annual meeting in Davos in 2017. “I believe very strongly that countries just like the united states could and should move to a digital currency ... so that you would have the ability to trace this kind of corruption. There are vital issues of privacy, cyber-security, but it'd actually have huge benefits.”
But, that does not mean it should be bitcoin.
"I'd like us to move more towards an electronic payments [system] but you do not need a bitcoin for that," Stiglitz told Bloomberg in january.
Bitcoin's market cap was close to $116 billion monday afternoon, in keeping with data from CoinMarketCap.com. a single bitcoin's price traded at just below $6,700, according to Coindesk.
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