Speaking at the World Economic Forum in Davos on Thursday, Shiller hailed bitcoin as a “really clever idea”. But although he was impressed with the technology behind it, he was concerned that it had “gone viral as a currency”.
“I tend to think of bitcoin as an experiment. It is an interesting experiment, but it’s not a permanent feature of our lives,” said Shiller, who has previously warned that the bitcoin price could collapse. “We are over-emphasising bitcoin, we should expand it out to blockchain, which will have other applications.”
Theresa May said in Davos that she was concerned that criminals were taking advantage of digital currencies, which can be used to anonymously transfer funds. “In areas like cryptocurrencies, like bitcoin, we should be looking at these very seriously,” May told Bloomberg.
The US treasury secretary, Steven Mnuchin, also flagged up concerns about misuse of digital currencies. “My number one focus on cryptocurrencies, whether that be digital currencies or bitcoin or other things, is that we want to make sure that they’re not used for illicit activities,” Mnuchin told CNBC. “So in the US our regulations [say] if you’re a bitcoin wallet, you’re subject to the same regulations as a bank.”
South Korea has recently announced a clampdown on digital currencies. From next month, people will be banned from using anonymous bank accounts for cryptocurrency trading.
Digital currencies have been a key topic of conversation at Davos. Ethereum, a rival to bitcoin, has set up its own lounge on the main promenade of the ski resort. Banks are showing particular interest in the blockchain – the digital ledger that underpins a cryptocurrency.
A senior Swedish central banker said bitcoin was too volatile to be classed as money. “In my view, cryptocurrencies, bitcoin and the others, the way I’ve seen them so far, they don’t meet the criteria to be called money,” said Cecilia Skingsley, deputy governor of the Riksbank.
“They are not a very stable store of value – they fluctuate a lot – and it’s not a very efficient medium of exchange because you don’t buy your groceries with bitcoin, you don’t get your salaries in bitcoin, and you certainly can’t pay your taxes with bitcoin.”
Skingsley said she understood that digital currencies were attractive in countries where people did not trust the public authorities, but she said bitcoin was a “poor alternative” as it was too volatile.
“If you’re talking of money in an efficient economy, over time it’s much better if you have a trustworthy authority that releases enough money – not too little and not too much,” Skingsley said.
However, some investors at Davos disputed the idea that bitcoin faced a rocky future. Jennifer Zhu Scott, of Radian Partners, said bitcoin was a “very lousy currency” and a “very lousy payment system” but insisted that it worked as an asset. “I don’t think bitcoin is disrupting currency or money. Bitcoin is disrupting gold,” she said.
Zhu argued that bitcoin was extremely efficient as a store of value, as there could only ever be 21m in circulation – and only about 16m have been created so far.
Neil Rimer, a general partner at Index Ventures, conceded that bitcoin could theoretically crash to zero, but he also hailed the progress since it was created nine years ago. “This is one of the most audacious, generous and profound inventions that I have witnessed in my career. It does have the ability to help many, many people,” he said.
guardian.co.uk © Guardian News and Media Limited 2010
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