“Once we get to the point where bitcoin is more widely accepted as a medium of exchange, that is when the government will probably intervene,” says American Eric Maskin, winner of the 2007 Nobel Prize in economics.
The economist said these words days ago, during his participation in the Oppenheimer Presenta program broadcast on the CNN television network. According to him, before governments try to lay down strict laws on cryptocurrencies, “they will try to create their own version of bitcoin in the hope that people will use it instead of private bitcoin.” By this he seems to be referring to central bank digital currencies such as China’s digital yuan or the Bahamian sand dollar.
Maskin is critical of bitcoin (BTC). During the interview, he compared it to a game of chance and assured that “bitcoin and other cryptocurrencies have no intrinsic value.”
In addition, this Harvard University professor considers BTC as a danger. “If bitcoin became popular so that people started using it instead of normal money, like dollars, pesos, euros, etc., then it would be much more difficult for governments to have a monetary policy,” he says.
Maskin, as he explained in the interview, sees it as something positive that a government can expand the money supply, that is, issue more fiat money. According to the economist, this serves “to give entrepreneurs more liquidity, to expand employment, expand production and return the economy to normal.” He also argues that it is good that central banks can do the opposite and reduce the money supply “if the economy is in danger of overheating.”
This position is consistent with that adopted by various governments around the world in an attempt to reactivate the economy, which is suffering the consequences of the Covid-19 pandemic. On the contrary, according to the position of other scholars, the inorganic issuance of money is the cause of a level of inflation and currency devaluation that is then difficult to stop.
Satoshi Nakamoto created Bitcoin with the latter concept in mind. The maximum emission is 21 million BTC and this has made the cryptocurrency show a deflationary trend to increasing demand, while supply remains static.
Eric Maskin: “banks provide a very useful service”
The award-winning economist, who also has a Ph.D. in philosophy, mentions another danger that he sees in crypto assets: that they interfere with the banking system.
Supporters of bitcoin say: “with bitcoin we can get rid of the banks.” But in reality, banks provide a very useful service, they play a very useful role in the modern economy. We need banks to invest in entrepreneurs. If I put my money in the bank, the money doesn’t stay there. The bank uses that money to make loans for productive projects, and one thing banks have specialized in is identifying which projects to lend money to. Banks are experts at that.Eric Maskin, economist and doctor of philosophy.
In saying this, Maskin seems not to take into account the changes that, in recent years, have occurred in the relationship between the banking system and BTC. On numerous occasions, The Advertiser Mirror has reported how commercial banks incorporate cryptocurrencies as one more financial product, within the portfolio they offer to their clients.
Convinced of his position, the Nobel Prize winner asks large companies that have incorporated BTC into their treasuries or that accept it as a form of payment, “to think twice.” According to him, Tesla, MicroStrategy, Delta Airlines, PayPal and other corporations do not see “the dangers that bitcoin could create both for the banking system and for monetary policy.”
About the electricity consumption of Bitcoin mining
Finally, Maskin referred to the repeated argument that Bitcoin, more precisely its mining, is harmful to the environment due to high energy consumption. “The energy consumption of these computers is very, very large and, because computers require electricity, and because electricity requires the burning of fossil fuels, it ends up contributing to global warming,” he says.
According to a study by the University of Cambridge, such a claim is incorrect. According to this house of studies, 76% of Bitcoin miners use renewable sources as part of their energy mix. It is also estimated that, of this group of miners, about 62% use hydroelectric energy.
An obvious example of this is the Chinese miners who mainly settle in the vicinity of hydroelectric dams. They take advantage of the rainy season, when electricity is cheaper, to mine Bitcoin.
This medium has released numerous bitcoin use cases that improve people’s lives. These include sending remittances, protection against inflation and protection against the possible bank “corralitos”. Anyway, Eric Maskin said, by way of conclusion, that he “does not see that bitcoin has enough social value to bring positive change”, but that, for him, cryptocurrency “harms society”.