Cryptocurrencies have recently become a global phenomenon, although there is still much to learn about this developing technology.
Concerns and anxieties abound regarding technology’s potential to upend established banking structures.
Recently Standford Law School professor Joseph A. Grundfest and I had a conversation about how cryptocurrencies is used today, where mistakes have been made, and what the future holds for this technology.
Professor Grundfest is in a unique position to offer insight on the future of cryptocurrencies as a form commissioner of the Securities and Exchange Commission and Specialist in financials system.
The Truth about Trustless system
Advocates of Bitcoin and other cryptocurrencies contend that these financial platforms are intrinsically trustworthy systems since they are not affiliating themselves with any nation-state, governing body, or other entity.
Some might contended that because it is independent of, say, the U.S federal government, cryptocurrencies are better than conventional physical currencies.
Whether you think it’s a good or negative thing, Grundfest points out that it’s not totally correct. Cryptocurrencies aren’t at all trustworthy.
They continued to depend on the infrastructure that underpins digital currencies like Bitcoin, much of which is found in China.
Theoretically, by putting its will on the data miners who keep cryptocurrencies going, the Chinese government may alter cryptocurrencies fundamentally.
Libra: Not all it’s cracked up to be
Libra, Facebook’s addition to the cryptocurrency industry, has received excitement as the solution to a number of financial problems.
The platform was created specifically to make international payments easier and get rid of extra fees and transaction charges.
Although Professor Grundfest acknowledges that the objective is noble, he thinks that the strategy is gravely wrong.
He disagrees with Facebook’s efforts to completely bypass conventional banking systems and does not believe that creating a new cryptocurrency is the best option for reducing payment transactions.
Instead, Professor Grundfest contends that Facebook should have established its own bank to serve as the users’ principal financial institution.
The business might have concentrated on developing banking systems that were unique to each country or region, meeting regulatory requirements, and reducing costs.
Once those had been established and public trust was built, then it would make sense to simply link each one to create a global network.
Is Stable coin the answer?
Similar to how American currency was once pegged to gold, stable coins have gained favour as a way to underpin cryptocurrencies with assets that have actual worth.
These assets could be anything at all, including different currencies or commodities.
Grundfest has a few complaints about this strategy, For starters, it effectively recreated an existing system.
The fact that it is more difficult to audit and monitor than conventional currencies is another worry, as it may make simpler for people to conduct fraud.
The webinar was concluded by Professor Grundfest, who discussed some of the most effective uses for cryptocurrencies.
Those in nations with weak currencies, for instance, would do better investing in Bitcoin than local stocks and bonds.
