As digital currencies continue to face regulatory pressures from major global economies, chief economist Nouriel Roubini argues against classifying bitcoin and other digital tokens as currencies during a panel discussion at the 2021 AIM summit.
“Cryptocurrencies are not currencies…they may have an asset value, but based on my definition they are not currencies,” said Roubini, who is renowned for foreseeing the mortgage collapse that helped produce the 2008 financial crisis.
Arguing that cryptocurrencies lack many of the basic traits currencies must possess, Roubini commented: “They are not a unit of account, scalable means of payment, or a stable store of value.”
“If something is volatile at 5 to 10 percent, it cannot be a currency… it has to have a stable value relative to the price index of goods and services,” he added.
As the values of bitcoin, ethereum and their lesser-known counterparts continue to fluctuate, investor interest continues to rise – as do security concerns for traditional currencies and the economies built around them.
A vocal critic of cryptocurrencies, Roubini stated that they are not a basis for payment system, reiterating the impeding security concerns surrounding them, and stating: “It is only a play on a speculative asset bubble.”
With that, central banks globally are warily eyeing the advancements of digital currencies, remaining hesitant to endorse them due to their volatility, speculative nature and lack of regulatory oversight.
Cryptocurrencies are currently not recognised as a legal tender by the Central Bank of the UAE (CBUAE).
Roubini also shared his view on how bitcoin cannot be a hedge against inflation, stating: “If you want to add traditional hedges against inflation, you go to TIPS, inflation-linked bonds, gold and precious metals, and forms of real assets, such as real estate…. There is a whole spectrum of assets that are low volatility and traditional stores of value against inflation.”
Chief economist Nouriel Roubini.
Gabriel Abed, the ambassador of Barbados to the UAE, founder and chairman of Abed Group, co-founder of fintech company Bitt, and a leading authority on central bank digital currencies (CBDCs) also took part in the discussion.
On his reasons behind establishing the Digital Eastern Caribbean Dollar (DCash), a central bank-backed digital currency in Barbados, Abed said: “The big impetus to inventing CBDCs came about when the tradability between bitcoin and the Barbados national dollar was prohibited by commercial banks and private institution.
“On one side, you had the regulators in the central bank saying they didn’t have a problem with that activity, on the other side, we had private institutions dictating the ability to have an event occur within that field.”
In 2020, 65 central banks in advanced and emerging market and developing economies were surveyed, with 86 percent responding they were actively engaging in some form of CBDC work, according to the Bank for International Settlements (BIS) report from January 2021.
In the next three years, central banks representing one-fifth of the world’s population are likely to issue a general purpose CBDC, with 21 percent of jurisdictions saying this is a possibility, the BIS report found. Sixty percent of central banks said they’re unlikely to issue any type of CBDC in the short or medium term.
A few countries have so far launched their own cryptocurrencies, including Venezuela, Estonia, Russia, Sweden and Japan. In July of this year, the CBUAE also announced its plan to issue its own digital currency as part of a broader 2023-2026 strategy, a plan that aims to help the UAE central bank grow into one of the largest in the world.
Gabriel Abed, the ambassador of Barbados to the UAE, founder and chairman of Abed Group and co-founder of Bitt.
“Ultimately, what we will end up seeing is a scenario where the monetary authorities around the world complete the process of deploying their central bank digital currency and then involve other regulators for activities that occur around trading payment gateways and accessing other currency types, like decentralised cryptocurrencies,” said Abed.
“I expect to see a world in the future that is less human-based regulation, and more regulation based on code… we are entering a phase in which autonomous programmable money is becoming the next thing,” he added.
Abed also believed that as long as regulators continue to become more educated, better frameworks will be built to help support and integrate the adoption of cryptocurrencies into the mainstream environment.
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