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While high-and-mighty economists can claim that crypto and the tech behind it are useless and pointless, the reality is that the true value of crypto lies in its enabling forces rather than in its “Number Go Up” power.
Not Pointless: Crypto Has an Enabling Power – but You Must Need It
A recent piece by Ryan Cummings, a staff economist for former President Joe Biden’s Council of Economic Advisers, and Jared Bernstein, who served as chair of the same council, has again reinforced the old and wrinkled notion that crypto is a solution in search of a problem, declaring it “pointless.”
While not entirely original, as some economists have pointed their finger at the industry with the same prerogatives, the novel idea is to tie crypto’s recent revival to the Trump Administration’s support, and its shortcomings to the rise of another seemingly revolutionary tech, artificial intelligence (AI), and to the actions of individuals like Sam Bankman-Fried, who carried their crypto startups to the ground.
The whole framing of the article can be summarized in a take on what crypto really is for the authors:
“ Crypto is, at best, a form of private money, which has a long history of ending up in financial ruin. At worst, it is a speculative and highly volatile asset with almost no practical use, whose backers were (and still are) constantly trying to embed it into the financial system.”
The first fault of the authors lies in grouping crypto as a homogeneous group. There are thousands of cryptocurrencies, and while some exhibit the characteristics of volatile assets issued for the sake of betting, others have inherent features that make them useful for various purposes.
Bitcoin, the original cryptocurrency, offered the first experiment in transacting money away from banks. Ethereum surged as a way to add programmability to bitcoin’s proposal. Solana presents another take on programmable money, while stablecoins are now becoming dollar proxies for embattled economies.
The second fault in this statement comes from assuming that crypto has “no practical use.” As a Venezuelan who has lived through several hyperinflationary processes and battled currency devaluations that would make an African country seem like Switzerland, stablecoins turned into a golden tool for receiving payments from abroad and for maintaining the purchasing power of my money.
Sadly, Venezuela is not the only country that has adopted crypto in dire times. Citizens from countries like Argentina and Bolivia, having experienced currency controls and large devaluations, have also found in crypto a tool to alleviate their troubles.
In a way, financial institutions are also reaping the benefits of crypto implementation, with credit giants such as Visa and Mastercard already adopting crypto rails to improve efficiency, helping transact billions in value and opening new markets at the same time.
This also debunks the notion of a forced embed of crypto into the current financial system: institutions are reaching out to crypto to avoid becoming stale, not the other way.
Banks are battling stablecoins rewards so hard for a reason: this new business model threatens to destroy their dominance of the financial market and their outdated credit intermediation modus operandi.
Summarizing, crypto brings financial freedom to those in need. But to realize crypto’s enabling power, you must actually need it, unlike these economists who seem blind to the problems outside the U.S., as they have been blessed with functional economies boasting single-digit inflation indices.
This is not to say that the crypto industry doesn’t have problems; it definitely has them, but to deny the redeeming possibilities the industry can bring to ailing economies and also to already established financial institutions is a fool’s errand.
FAQ
- What recent claims have economists made about cryptocurrency?
Ryan Cummings and Jared Bernstein assert that crypto is a “solution in search of a problem,” labeling it as “pointless” and aligning its revival with support from the Trump Administration. - What are the criticisms of the economists’ perspective on crypto?
Critics argue that the authors inadequately group all cryptocurrencies, ignoring the diversity within the sector, and mistakenly claim that crypto has “no practical use.” - How have individuals in countries like Venezuela benefited from cryptocurrency?
In hyperinflationary contexts, stablecoins have become essential for maintaining purchasing power and receiving payments, demonstrating practical applications in economies facing severe challenges. - What role are financial institutions playing in the adoption of crypto?
Banks and credit giants like Visa and Mastercard are embracing crypto innovations to enhance transaction efficiency and compete with emerging stablecoin business models, challenging traditional financial dynamics.
