Ben Bernanke, a predecessor of the current Fed chairman, Jerome Powell, said that bitcoin and other cryptocurrencies were speculative, volatile, and were mostly used for “underground economy activities”.
Bernanke was the Fed chairman during the great recession of 2008/9. He oversaw the bank bailouts and presided over the many billions delivered to the likes of JP Morgan, Morgan Stanley, and Goldman Sachs, in order to make sure that they stayed afloat.
When asked in an interview by CNBC Squawkbox whether he thought that crypto could become an alternative asset for investors. Bernanke replied that crypto and bitcoin were only really successful as speculative assets.
He said that in his belief cryptocurrencies were intended to be a substitute for fiat money, but he said that they had not succeeded because people weren’t spending bitcoin on everyday things.
“Nobody buys groceries with bitcoin because it’s too expensive and too inconvenient to do that.”
He added that there was no stability in the value of bitcoin either, and went on to say what he thought bitcoin was mainly used for:
“The main use of bitcoin is mostly for underground economy activities, and things that often, things that are illegal or illicit.”
When asked by the interviewer whether he bought into bitcoin being seen as a store of value or a version of digital gold, Bernanke compared gold and bitcoin by saying:
“Gold has underlying use value. You can use it to fill cavities. The underlying use value of bitcoin is to do ransomware or something like that.”
Finally, Bernanke warned that bitcoin would probably face more regulation, and that its “anonymity was also at risk”.
Opinion
For a man who had previously given everything to defend the fiat monetary system in his tenure as Fed chairman, Bernanke was always going to be extremely negative on private digital assets that are looking to usurp the dollar and other fiat currencies.
His remarks show just how out of touch he is now. In order to answer his statement about nobody using bitcoin to buy groceries, It’s well known that people will spend the least valuable currency they have first.
Saying that bitcoin is mainly used for underground, illicit activities is completely untrue, as reported by Chainalysis in its 2022 Crypto Crime Report.
“Transactions involving illicit addresses represented just 0.15% of cryptocurrency transaction volume in 2021”
It just might be wondered what the figure might be for the U.S. dollar? Bitcoin is transparent, and any government enforcement agency worth its salt would be able to track any illicit activities. The same certainly could not be said of fiat currencies.
Even Janet Yellen, U.S. Treasury secretary, has given up bandying these kinds of statements about, given that they are so patently untrue. If Bernanke wants to remain relevant he must at least get off of first base and start asking questions about crypto.
At the end of the day, what he learns may make him even more anti-crypto, but that’s because he might come to the realisation that alternative assets such as bitcoin really do threaten the traditional banking system that he has spent his life defending.
Yes, it is still very early days for bitcoin, but as more investors, and especially institutions realise that this is the only asset, besides gold, that will hold their wealth beyond the manipulations of any central bank, the flight into this asset may eventually become a flood.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
