Cryptocurrencies are not a unit of account and calling them currencies is a “misnomer”, top economist Nouriel Roubini has said, as major global economies intensify their regulatory scrutiny of Bitcoin and other digital currencies.
“Cryptocurrencies may have an asset value but based on my definition they are not currencies. That’s a fact,” Mr Roubini, chairman of New York-based consultancy Roubini Macro consultancy and well known for predicting the subprime mortgage crisis in the US and the subsequent 2008 global financial crisis, told the Alternative Investment Management Summit (AIM) in Dubai, on Tuesday.
“If something is volatile [at] 5 to 10 per cent, [it] cannot be a currency. A currency has to have a stable value relative to the price index of goods and services.”
Mr Roubini made the remarks while speaking at a panel discussion on the Post-Covid Digital Currency War at the summit.
Gabriel Abed, the ambassador of Barbados to the UAE and co-founder of Bitt, a fintech company, also took part in the discussion
Central banks around the world have been reluctant to endorse cryptocurrencies because of their speculative nature, lack of value and regulatory oversight. The Central Bank of the UAE does not recognise cryptocurrencies as a legal tender.
Last month, China, the world’s second-largest economy, vowed to root out “illegal” activity in the trading of Bitcoin and other virtual currencies, as it renewed its tough talk on cryptocurrencies.
The government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people's properties and maintain economic, financial and social order”, Reuters reported on September 24, citing the People's Bank of China (PBOC).
Cryptocurrencies must not circulate in markets as traditional currencies and overseas exchanges are barred from providing services to mainland investors via the internet, the PBOC said.
Cryptocurrency “is not a basis for payment system and whether it is secure or not, we don’t know”, Mr Roubini, who has been a vocal critic of cryptocurrencies, said during the panel session.
Despite the increased crackdown by regulators, cryptocurrencies have continued to trade higher over the past few weeks. Bitcoin, the world’s largest cryptocurrency, was down 3.29 per cent to trade at $55,430.87 at 11.09am UAE time on Wednesday. However, it has risen almost 100 per cent since the start of the year. Ethereum, the second-largest cryptocurrency, was down 0.71 per cent at $3,461.87, according to coinmarketcap.com website.
In a report in June, the Bank for International Settlements (BIS), the global body for central banks, called cryptocurrencies speculative assets that in many instances enable criminal activity and “work against the public good”.
“It is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes,” the BIS said.
However, Mr Abed is bullish about cryptocurrencies.
“What we are seeing right now is regulators becoming more and more educated and through that education, they are building better frameworks to allow the adoption and utility of these new assets to become pervasive in society,” he told The National on the sidelines of the event.
“I think through that understanding that we are seeing from government, from authorities and from the regulators we are going to have a much better playing field to allow these technologies to really take its mainstream environment.”
When asked about China’s decision to ban cryptocurrencies, Mr Abed said: “I wouldn’t use China as a measuring stick for the general adoption of cryptocurrencies because the Chinese environment is not in line in terms of what the rest of the world would do and what China is doing is for their own population and for their own needs.”
US Securities and Exchange Commission chairman Gary Gensler earlier this month said the US will not follow China’s lead in banning digital tokens.
The world’s largest economy will focus on ensuring that the industry follows investor and consumer protection rules, anti-money laundering regulations and tax laws, he said.