Global economist Nouriel Roubini, one of the few who predicted the 2008 financial crisis, is making sure U.S. senators don’t miss his warning on cryptocurrency.
Within minutes of testifying at a congressional hearing on Capitol Hill on Thursday, Roubini sounded alarms on multiple aspects of the new digital asset class.
“Crypto is the mother or father of all scams and bubbles,” Roubini, also a professor at New York University, told the U.S. Senate Committee on Banking, Housing and Community Affairs at a hearing.
The self-described expert on international financial markets, asset and credit bubbles and their bust, said the first warning sign came after late last year as bitcoin neared a high of almost $20,000. Roubini told senators that “literally every human being I met between Thanksgiving and Christmas of 2017” asked him if they should buy cryptocurrency,
“Especially folks with zero financial literacy – individuals who could not tell the difference between stocks and bonds – went into a literal manic frenzy of Bitcoin and Crypto buying,” Roubini said in prepared testimony.
In a prepared testimony, Roubini called out “scammers, swindlers, criminals, charlatans, insider whales and carnival barkers (all conflicted insiders)” who he said tapped into “clueless retail investors’ FOMO (‘fear of missing out’),” then took them for a ride with pump-and-dump schemes for “scammy crappy assets at the peak that then went into a bust and crash — in a matter of months — like you have not seen in any history of financial bubbles.”
Since the height of the frenzy, bitcoin has fallen more than 65 percent, in what Roubini calls “crypto-apocalypse.” The total market capitalization for cryptocurrencies is down by more than 60 percent, according to data from CoinMarketCap.com. Bitcoin dropped 6 percent to a low of $6,125.75 Thursday as the rest of the global markets saw their biggest drop since February this week.
Other economists and Wall Street leaders have agreed with Roubini’s assessment on bitcoin. But few have as aggressively spoken out about its underlying technology, blockchain. Roubini sees almost no reason for its widespread adoption.
“Now that the crypto bloodbath is in full view the new refuge of the crypto scoundrels is ‘blockchain’, the technology underlying crypto that is now alleged to be the cure of all global problems, including poverty, famines and even diseases. But as discussed in detail below blockchain is the most over-hyped — and least useful — technology in human history,” Roubini said. “In practice it is nothing better than a glorified spreadsheet or database,” he said.
Peter Van Valkenburgh, director of research at Washington-based lobbying group Coin Center, took a starkly different stance. While he acknowledged that it’s not widely accepted as a payment method, Van Valkenburgh said that aspects of it are still promising.
“Is it perfect? No. Neither was email when it was invented in 1972,” Van Valkenburgh said. “The mere fact that it works without trusted intermediaries is amazing — it’s a computer science breakthrough. It will be as significant for freedom, prosperity and human flourishing as the birth of the internet.”
Other members of Congress have debated the merits of cryptocurrency in smaller roundtables throughout the fall. In September, House of Representatives members met with industry representatives to address regulatory concerns and fears of innovation fleeing the U.S. Following that meeting, more than a dozen members of Congress sent a letter to SEC Chairman Jay Clayton, calling for a clearer picture of how the agency views the digital asset class.
Rep. Tom Emmer, R-Minn., said he plans to introduce three crypto- and blockchain-friendly bills, while Rep. Warren Davidson, R-Ohio, is drafting one to be introduced this fall that he says is not yet “fully cooked.”