What Makes a Currency?
In a recent address, John Williams, the soon-to-be president of the New York Federal Reserve Bank, shared his views on cryptocurrency, suggesting it falls short in fulfilling the fundamental requirements of a currency. According to Williams, a viable currency must possess a reliable store of value. It’s a tall order for cryptocurrencies which fluctuate like the rider on a mechanical bull—wildly unpredictable.
The Elasticity Challenge
Williams emphasized that currencies need a certain level of elastic responsiveness to adapt to shifting economic conditions. Think of it like a good pair of pants: a great currency should stretch when needed without losing its shape. Unfortunately, cryptocurrencies aren’t exactly designed for this type of flexibility. Instead, they seem to be more suited to a rollercoaster ride.
Concerns Over Illicit Activities
Williams did not shy away from addressing the elephant in the crypto room: the potential for fraud and illicit activities associated with various cryptocurrencies. He pointed out the alarming trends in money laundering and terror financing linked to digital currencies. In his words, “The setup or institutional arrangement around Bitcoin and other cryptocurrencies has lots of problems there.” Sounds a bit like the wild west, doesn’t it?
Currencies and Central Banks: A Marriage Made in Heaven?
According to Williams, the conception and supply of money should primarily reside with government institutions and central banks. This raises some eyebrows, as it suggests a marriage of convenience—central banks providing stability and regulation over the chaotic world of cryptocurrencies. Just like in any dysfunctional relationship, there are likely to be some heated debates on who controls the money.
Regulatory Uncertainty: A Cryptic Dilemma
The crypto realm is currently plagued by a murky regulatory environment. Investors are a bit like kids in a candy store, unsure whether they’re allowed to touch anything without getting into trouble. High-profile investors are now nudging the Securities and Exchange Commission (SEC) to ease up on regulations regarding Initial Coin Offerings (ICOs). This ongoing tug-of-war between innovation and regulation could either breathe life into the crypto industry or suffocate it.
+ There are no comments
Add yours