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During the October 11, 2018, U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing, economist Nouriel Roubini, famous for predicting the 2008 financial crisis, and Coin Center’s Research Director, Peter Van Valkenburg commented on the cryptocurrency industry at large. Their testimonies brought to light diametrically opposing views on the current status and future of the crypto industry.
Roubini Slams Crypto in Senate Hearing
Dr. Nouriel Roubini, Professor of Economics at the Stern School of Business at New York University, famed for being one of the few to predict the 2008 financial crisis, has taken another jab at cryptocurrencies and blockchain, calling the phenomenon “the mother of all scams.”
During the Senate Committee on Banking, Housing, and Urban Affairs hearing on October 11, Roubini testified alongside Peter Van Valkenburgh, the director of research at Coin Center.
Roubini’s prepared testimony, which Bloomberg called a “riot act,” classified cryptocurrencies as nothing more than “now busted” bubbles. He also fired shots at the technology behind digital tokens, which many believe is what holds the real promise.
In his opening statement, Roubini said that that blockchain is the most overhyped technology ever created, and called it nothing more than a glorified database. The New York University professor, dubbed “Dr. Doom” in the cryptocurrency community due to his gloom predictions of the industry’s future, believes that the technology isn’t any better than a spreadsheet.
Roubini also said that the term “decentralized,” used to describe the quality of all blockchains, is a misnomer, as a blockchain cannot be both safe, decentralized and scalable. In his statement, Roubini argues that Bitcoin, as the most popular and widespread virtual currency, is only partially decentralized, as most of its mining takes places in a few hubs around the world, particularly China, Russia, and Iceland.
When asked about the scalability of Bitcoin, and whether or not it could affect the way the currency is used, Roubini said that it would come at the cost of security. Any effort such as the proof-of-stake, to increase its scalability will lead to more centralization, the professor said.
Roubini explained in his statement:
“The whole logic of PoS is to give greater voting power to those who have a stake in a coin – those who own it the most and mine it the most. But that leads to a massive centralization problem.”
Van Valkenburgh Takes a More Nuanced Approach to Crypto, Compares It to the Early Versions of the Internet
Looking to change the committee’s opinion on cryptocurrencies was Peter Van Valkenburgh, who believes that digital money promotes financial inclusion and streamlines e-commerce and online interaction.
In his statement, Van Valkenburgh compared blockchain technology and cryptocurrencies to the emergence of the Internet in the mid-90s, saying that the same type of technological innovation has changed the way the world works.
The research director at Coin Center did agree with Roubini on a few crucial points. Van Valkenburgh also sees that the industry is still at its very beginnings and that there is much more room to grow. Roubini’s remarks on how it’s been almost ten years since the technology was invented and that it has not seen mainstream adoption didn’t go unheard.
During the hearing, Van Valkenburgh said that it took more than two decades for the technology behind email and the internet to become available for consumer use. His testimony mirrored his prepared statement, in which he said that policymakers approach these new systems the same way the Clinton Administration did to the development of the internet in the 1990s.
And while Van Valkenburgh cited examples of cryptocurrencies being used as a legitimate substitute for fiat, he said that the truly disruptive innovation underlying Bitcoin is the consensus mechanism.
Van Valkenburgh wrote in the statement:
“Networks powered by public consensus mechanisms mirror the early internet, and may one day become as indispensable as the Internet in facilitating free speech, competition, and innovation in computing services.”
The Senators questioning the two also had mixed feelings about the technology, with many being aware of its potential, but remaining doubtful about the risks cryptocurrencies pose to consumers. However, all of the committee members did agree that the discussion was fruitful, and presented a big step forward for the market.