Matt Phillips at Quartz had an interview with former Fed chair and current hedge fund consultant Ben Bernanke: http://qz.com/553407/ben-bernanke-on-bu ... n-anymore/ and he used the opportunity to bring up Bitcoin. His response was positive on the technological front, but he had some arguments against it on economic theory grounds. His full response was:
"It’s interesting from a technological point of view. We’re in a world where the payments system is evolving quickly and new approaches to managing payments are proliferating, and some of the ideas around bitcoin will no doubt be useful in doing that. But I think bitcoin itself has some serious problems. The first is that it hasn’t shown to be a stable source of value. Its price has been highly volatile and it hasn’t yet established itself as a widely accepted transactions medium.
But the real serious problem that it has is it’s anonymity, which is a feature, and is also a bug, in that it has become in some cases a vehicle for illicit transactions, drug selling or terrorist financing or whatever. And you know, governments are not happy to let that activity happen, so I suspect that there will be oversight of transactions done in bitcoin or similar currencies and that will reduce the appeal."
Let's take a closer look, his criticism boiled down to two main points:
- Its volatility shows that it's not a suitable store of value
- Its anonymity poses regulatory problems
So, where to begin. Let's grant him the first point. It's a volatile currency, okay fine. That's the nature of a the free market and a new instrument. However, Dr. Bernanke is dead wrong on his second point.
Is bitcoin anonymous? No, it is not. The blockchain is, after all, a public ledger of all transactions. It's a forensic accountant's wet dream: the ultimate paper trail.
This is why organisations like the Blockchain Alliance exist. Because there doesn't need to be "regulatory oversight" beyond what already exists. People who deal in bitcoin are money transmitters. If investigators are trying to find who the owner of coins are, they can trace the transaction they found back to the original person who exchanged them for fiat.
Bitcoin is just digital cash. We know governments are trying to eliminate cash also, but when the elites are making false assumptions about new technologies like Bitcoin, and then base their policy decisions on this misinformation, then everyone loses.
Let's be clear: Bitcoin can be anonymous. But it's not really a selling point of the protocol. Pseudonymous at best, but anonymous? Dr. Bernanke, do your homework a bit more before you start making such policy analysis.
