Still no Love for Cryptocurrencies

Renowned economist Nouriel Roubini, known as “Dr. Doom,” remains critical of cryptocurrencies

Photo by Bruno Guerrero on Unsplash

Please note that this article serves as a contemporary news analysis that presents the publicly stated opinions of various individuals. By juxtaposing these perspectives with contrasting viewpoints, the aim is to offer a more well-rounded understanding of the topic at hand.

Source of the reporting on Roubini at FFWD23 (in German): https://financefwd.com/de/nouriel-roubini-ffwd23-kryptowaehrungen/

Nouriel Roubini, Professor Emeritus at New York University’s Stern School of Business, gained fame for accurately predicting the 2008 financial crisis.

He has contributed significantly to economic theory, particularly in the areas of international macroeconomics, political economy, and sovereign debt.

Despite his numerous achievements, Roubini’s views on cryptocurrencies have been a subject of debate.

The title of his talk at the Finance Forward Conference in Hamburg, Germany, “Dr. Doom takes on the crypto scene,” set the stage for Roubini’s critique.

He argued that cryptocurrencies are not currencies, calling them useless and claiming that 97 percent are either fraud or worthless.

Roubini explained that for a currency to be effective, it must serve functions such as enabling exchange or storing value. He asserted that cryptocurrencies, including Bitcoin, currently lack these qualities.

Roubini compared the transaction capabilities of cryptocurrencies to traditional payment systems, stating that Visa can perform 50,000 transactions per second, while the Bitcoin blockchain can only process 7.

He also criticised stablecoins, which are designed to minimise price fluctuations and serve as a means of payment. Roubini believes that stablecoins betray the original ideology of the blockchain community by partially replicating fiat currencies like the dollar.

Another concern for Roubini is the vulnerability of crypto-projects to fraud, which he considers a systemic issue, referring to it as “not a bug… but a feature” of the crypto-space.

He compared the situation to the early days of the internet, where many supposed innovations disappeared after a decade, but crucial ones like HTML and email persisted.

Roubini does not see the same potential for blockchain technology.

According to Roubini, the only reason the crypto industry survives is due to “regulatory arbitrage,” meaning the high margins crypto providers can earn because of relatively lax regulation compared to the traditional financial industry.

He doesn’t believe that cryptocurrencies will ever become mainstream, rendering their value ultimately inconsequential.

“So what if Bitcoin is at a few thousand euros?” Roubini asked rhetorically.

As Roubini’s statements show, the future of cryptocurrencies continues to be a highly debated topic among economists.

To gain a better understanding of Nouriel Roubini’s work, perspectives, and contributions to the field of economics, consider exploring the following recommended readings:

1. “Crisis Economics: A Crash Course in the Future of Finance” (by Nouriel Roubini and Stephen Mihm, 2010)
2. “Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets” (by Nouriel Roubini and Brad Setser, 2004)
3. Project Syndicate: Roubini regularly contributes opinion pieces to Project Syndicate, where he discusses various aspects of the global economy, financial markets, and policy issues
4. Nouriel Roubini’s website (article section)

A more Comprehensive View

To provide a more comprehensive view, it is important to consider the perspectives of other opinion shapers, including prominent economists, like Paul Krugman, Tyler Cowan and Kenneth Rogoff, as well individuals with significant influence on the debate like Christine Lagarde and Silvio Micali.

Paul Krugman — A Prominent Economist and Public Intellectual Critical of Cryptocurrencies

Similar to Roubini, Nobel laureate in economics, New York Times columnist, and distinguished professor at City University of New York, Paul Krugman, expresses doubts about the long-term viability and utility of cryptocurrencies.

As a highly respected public intellectual, Krugman has not shied away from sharing his opinions on various economic issues, including the rise of digital currencies.

Throughout his career, Krugman has made significant contributions to international trade and economic geography, for which he was awarded the Nobel Prize in 2008. His work has had a profound influence on understanding international trade patterns and the impact of globalization.

In the context of cryptocurrencies, Krugman has raised several concerns.

He is particularly worried about their environmental impact due to the energy-intensive mining process, vulnerability to fraud and hacking, and the speculative nature of their value, which often results in extreme price volatility.

Despite these criticisms, Krugman does not completely dismiss cryptocurrencies. He acknowledges the potential for the technology to evolve and address some of the challenges it currently faces.

For those interested in exploring Krugman’s perspectives further, consider the following recommended readings:

1. “The Return of Depression Economics” (1999)
2. “The Conscience of a Liberal” (2007)
3. “End This Depression Now!” (2012)

While Paul Krugman remains critical of cryptocurrencies, his status as a renowned economist and public intellectual lends weight to his opinions. By engaging with the public and sharing his insights, Krugman encourages constructive discourse and contributes to the ongoing debate.

Tyler Cowen — An Optimistic Outlook on Cryptocurrencies and Their Potential

Tyler Cowen, a distinguished economist, public intellectual, and professor of economics at George Mason University, holds a more positive view on cryptocurrencies.

As a well-regarded commentator on economic and political issues, Cowen frequently shares his opinions through various platforms, including his influential blog, Marginal Revolution, and as a regular contributor to Bloomberg Opinion.

Throughout his career, Cowen has made significant contributions to several areas of economics, including welfare economics, public choice theory, and cultural economics.

His work often delves into the implications of economic policies and the role of culture in shaping economic outcomes.

When it comes to cryptocurrencies, Cowen acknowledges the issues raised by skeptics like Roubini and Krugman but maintains an optimistic stance.

He believes that cryptocurrencies have the potential to revolutionize finance, particularly in emerging markets where access to traditional financial services can be limited. Cowen envisions digital currencies as a means to facilitate cross-border transactions, increase financial inclusion, and combat corruption by providing a transparent, decentralized alternative to traditional financial systems.

As a public intellectual, Cowen engages in open discussions and debates about cryptocurrencies and their potential impact on the global economy.

By sharing his insights, he encourages a more comprehensive understanding of the advantages and challenges associated with digital currencies.

For those interested in delving deeper into Cowen’s perspectives and work, consider the following recommended readings:

1. “Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist” (2007)
2. “The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better” (2011)
3. “The Complacent Class: The Self-Defeating Quest for the American Dream” (2017)

Tyler Cowen’s optimistic outlook on cryptocurrencies and their potential to transform finance, particularly in emerging markets, offers a valuable counterpoint to the more skeptical views of other prominent economists.

Christine Lagarde — A Balanced Perspective on Cryptocurrencies and Their Potential

Christine Lagarde, a prominent figure in the world of finance and economics, holds an inclusive opinion on cryptocurrencies.

As the former Managing Director of the International Monetary Fund (IMF) and the current President of the European Central Bank (ECB), Lagarde is known for her pragmatic approach and leadership in shaping monetary policies and global economic discourse.

As an opinion shaper and decision-maker, she often shares her thoughts and observations openly, influencing the direction of economic policies and financial regulations worldwide.

Throughout her career, Lagarde has played a crucial role in tackling international financial crises and strengthening global economic cooperation. With her background in law and politics, she has brought unique insights into the financial world, driving policy changes and advocating for inclusive growth and gender equality in the economic sphere.

When it comes to cryptocurrencies, Lagarde adopts a balanced approach.

She acknowledges the potential benefits of digital currencies, such as increased efficiency, reduced transaction costs, and financial inclusion. However, she also stresses the need for proper regulation and oversight to manage risks associated with these new financial instruments, including money laundering, terrorism financing, and market instability.

Lagarde’s pragmatic approach to cryptocurrencies reflects her broader commitment to ensuring a stable and inclusive global financial system.

She plays a vital role in fostering informed discussions and debates about the future of digital currencies, their potential benefits, and the necessary regulatory frameworks to ensure their safe and responsible use.

For those interested in exploring Lagarde’s perspectives and work further, consider the following recommended readings:

1. “Economic Inclusion and Financial Integrity” (2014)
2. “Central Banking and Fintech: A Brave New World?” (2017)
3. “Winds of Change: The Case for New Digital Currency” (2018)

Christine Lagarde’s balanced and inclusive opinion on cryptocurrencies reflects her commitment to carefully considering the benefits and risks of new financial instruments.

Kenneth Rogoff — A Sceptical Voice on Cryptocurrencies and Their Potential Impact

Kenneth Rogoff, a renowned Harvard economist and former Chief Economist of the International Monetary Fund (IMF), shares the scepticism of Roubini and Krugman when it comes to cryptocurrencies.

As a public intellectual and influential economist, Rogoff frequently shares his opinions on various economic topics, engaging in open and public discussions on the potential and pitfalls of new financial instruments.

Throughout his career, Rogoff has made significant contributions to various fields of economics, including international finance, monetary policy, and economic history. His research has covered topics such as exchange rates, sovereign debt, and central banking, providing valuable insights into the functioning of the global financial system.

Rogoff is particularly sceptical of cryptocurrencies and their potential to revolutionize finance.

He argues that digital currencies are more likely to be used for illicit purposes, such as money laundering and tax evasion, than to bring about transformative changes in the financial landscape. Rogoff also questions the ability of cryptocurrencies to function effectively as currencies, citing their extreme volatility and limited acceptance as major barriers to widespread adoption.

Despite his sceptical stance, Rogoff’s perspective on cryptocurrencies contributes to a balanced and informed debate on their potential impact and future development.

For those interested in delving deeper into Rogoff’s perspectives and work, consider the following recommended readings:

1. “This Time Is Different: Eight Centuries of Financial Folly” (with Carmen M. Reinhart, 2009) (here is the paper on which the book is based)
2. “The Curse of Cash” (2016)

Kenneth Rogoff’s sceptical outlook on cryptocurrencies offers an important counterpoint to more optimistic perspectives, enriching the ongoing debate on the potential impact of digital currencies on the global financial system.

As a public intellectual, Rogoff contributes valuable insights and helps shape discussions on the future of cryptocurrencies and their role in finance.

Silvio Micali — A Proponent of Cryptocurrencies and Their Underlying Technology

Silvio Micali, a highly-respected MIT professor and Turing Award winner, is a staunch supporter of cryptocurrencies and their potential to bring about meaningful change in various aspects of society.

Micali frequently shares his opinions on the transformative power of blockchain technology in an open and public manner, contributing to the ongoing discourse on the subject.

Micali’s theoretical contributions span a wide range of areas, including cryptography, zero-knowledge proofs, and distributed consensus algorithms. These groundbreaking innovations have laid the foundation for numerous applications in computer science and cryptography, making Micali a significant figure in the development of secure, transparent, and decentralized solutions.

As a firm believer in the potential of cryptocurrencies, Micali argues that their underlying technology, blockchain, can revolutionize different sectors of society. He envisions cryptocurrencies as a means to address critical challenges such as secure voting systems, efficient supply chain management, and reliable digital identity verification, among others. Micali’s optimism stems from his deep understanding of the technology and its capacity to create decentralized systems that are resilient, secure, and transparent.

It’s important to note that Micali is also the creator behind Algorand, a cutting-edge blockchain platform designed to address the scalability, security, and decentralization challenges faced by traditional blockchain systems. This involvement in the development and promotion of a cryptocurrency platform should be taken into account when assessing his comments and perspectives on the subject.

In conclusion, Silvio Micali’s support for cryptocurrencies and his advocacy for the transformative potential of blockchain technology offer a valuable and informed perspective on the ongoing debate surrounding digital currencies.

As a public intellectual and a computer scientist with a deep understanding of the underlying technology, Micali plays a crucial role in shaping discussions and contributing to our understanding of the impact of cryptocurrencies and blockchain.

For those interested in delving deeper into Silvio Micali’s work and perspectives, as well as understanding the broader context of cryptocurrencies and blockchain technology, consider the following recommended readings:

For those interested in delving deeper into Silvio Micali’s work and perspectives, consider the following recommended readings:

1. Fair Electronic Exchange with Invisible Trusted Parties (2006)
2. “Algorand: Scaling Byzantine Agreements for Cryptocurrencies” (with Yossi Gilad, Rotem Hemo, and Georgios Vlachos, 2017): This paper presents the Algorand protocol, Micali’s innovative blockchain platform that aims to address scalability, security, and decentralization challenges.

It is crucial to recognize that reaching a definite conclusions about questions or topics that cannot be comprehensively decided yet may not be productive.

While this essay has presented the views of several authoritative figures in the fields of economics, international finance and cryptocurrencies* it is essential to be cautious when appealing to authority.

Topics such as the future of cryptocurrencies are complex and speculative, involving numerous variables that are difficult to predict.

No single expert or group of professionals can definitively determine the trajectory of this rapidly evolving industry.

Furthermore, it is crucial to maintain an open and inquisitive mindset when exploring complex subjects like cryptocurrencies.

The perspectives shared by these commentators should be seen as contributing to a broader discourse rather than offering definitive answers.

It is through a collective effort to investigate, experiment, and adapt that society can ultimately benefit from the potential advantages of cryptocurrencies and blockchain technology while managing associated risks.

In the end, the future of cryptocurrencies will likely be shaped by a multitude of factors, including technological advancements, regulatory frameworks, market forces, and global events. As such, a measured and balanced approach, informed by diverse perspectives and an ongoing commitment to learning and adaptation, is essential for navigating the complexities of this emerging field.

*admittedly, Micali is the only one mentioned who is actually directly involved in a major cryptocurrency project (if “involved” is the right term to use for someone who created a cryptocurrency protocol).