Nouriel Roubini, an influential American economist who is passionate in his opposition to cryptocurrency and blockchain technology, will testify before the Senate Banking, Housing, and Urban Affairs Committee on Thursday.
He has published the comments that he intends to give – and he hasn’t pulled any punches.
Turkey-born Roubini holds a Ph.D. in international economics from Harvard University and has worked for as an advisor for the International Monetary Fund, the Federal Reserve, the United States Treasury Department, and the Bank of Israel, among others.
He is best known for predicting the 2008 financial crisis. He wrote in an IMF document in 2006 that home prices were riding a wave of speculation that would inevitably collapse and take the economy with it. While this prediction proved to be accurate, his other portents – for example, that Italy, Spain, Portugal, and Greece would have to leave the eurozone – earned him the nickname ‘Dr. Doom’.
His attitude to cryptocurrency is characteristically sceptical. At a heated panel discussion at the Milken Institute Global Conference in May 2018, he referred to decentralisation as “bullshit”, and responded to a claim that cryptocurrency allows people to bypass banks with the comment: “You’re just making stuff up.”
Later that same month, he engaged in a debate with Joseph Lubin, co-founder of Ethereum and head of ConsenSys. There he reiterated his belief in centralised systems and said that decentralised applications are usually pyramid schemes.
Looking forward to intelligent counter-arguments to my 30 page arguments against crypto. Have seen none so far. Only personal insults and attacks by barking dogs! https://t.co/uPKIY0FF5b
— Nouriel Roubini (@Nouriel) October 11, 2018
“The Mother and Father of All Bubbles”
The hearing to be held today is entitled ‘Exploring the Cryptocurrency and Blockchain Ecosystem’. He has pre-released his 37-page statement, wherein can be found phrases like “crypto bloodbath” and “the most over-hyped – and least useful – technology in human history”.
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He will testify that cryptocurrency is “the mother and father of all bubbles”, that ” Bitcoin’s only real use has been to facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering,” and that the addition of extra currencies to the existing system is “utterly idiotic”.
His arguments include:
- Cryptocurrencies have no intrinsic value, as opposed to fiat currencies “because they can be used to pay taxes.”
- Bitcoin is deflationary because of its 21 million unit limit (” Bitcoin’s supposed advantage is also its Achilles’s heel,”).
- Stablecoins are “the biggest scam of all.”
- Scalability, decentralisation, and security cannot all exist at the same time.
- That financial crises pre-existed central banks; these were created to provide financial stability.
- The revolution in financial technology has to do with artificial intelligence, big data, and the internet of things – not blockchain.
Furthermore, in Roubini’s opinion, decentralisation is a not only “bullshit’ but is actually a scam. He argues that while the belief itself has the same roots as the political extremism that believes that all centralised power is intrinsically evil, the ironic reality is that decentralisation was created by “a bunch of self-serving greedy white men” to enrich themselves.
There is more, but you get the point.
Joining him at the committee will be a cryptocurrency advocate, Peter Van Valkenburgh, research director at CoinCenter, a Washington-based non-profit research and advocacy centre for cryptocurrency. In March, he testified in cryptocurrency’s favour at a Congressional hearing on the subject of ICOs.
The Senate Banking, Housing, and Urban Affairs Committee held its first cryptocurrency hearing in February 2018. This hearing consisted of Jay Clayton and J. Christopher Giancarlo, heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission respectively, fielding questions from politicians who wanted to know what cryptocurrency is.
One surprising result of that hearing was that Giancarlo turned out to be quite open to the new industry.
More recently, Republican congressman Warren Davidson held a hearing called ‘Legislating Certainty for Cryptocurrencies‘, which brought tens of significant figures from various industries who all argued in favour of regulation for the cryptocurrency sector.