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Wednesday, October 27, 2021

Bitcoin has established itself in five years


Amir Ullah Khan, president Glocal University strongly believes that central banks across the globe cannot ignore bitcoins anymore. Excerpts from an exclusive interview to K S Narayanan
K S NARAYANAN | Issue Dated: January 5, 2014, New Delhi
Tags : Bitcoin |

Bitcoins are the new rage. How long it will take to settle down?
It is very difficult to say. It has established itself in less than five years, starting only in 2009. On the web, it is easy to go viral in a matter of a few days. That said it is also easy to vanish from sight. Remember the South Korean Gangnam style that came, ruled the world and disappeared all within six months.

Does the rise of bitcoins signal the end of hegemony of the dollar?
Again, a tough question. However the US dollar has an advantage in that it carries a sovereign guarantee and is backed by the largest economy in the world. The bitcoin is on its own.
Is it a renegade currency trying to disrupt the global economy and weaken the central banks?
No. The central banks don’t just print money. They have a number of regulatory functions to perform; they monitor banks, control inflation and manage reserves.
Could bitcoin be a new ponzi scheme at the global level?
It is clearly not, at least for now.
World economy is yet to recover from the global financial crisis. Could bitcoins become a new problem for policy makers?
Only where they get used for money laundering.
How can a currency come up without the approval and regulation of several central banks?
Currency is what gains the trust of most people. Strange things have been used as currencies across the world. Cigarettes in prisons, shells in some parts of the world, deer skin in some others. All this happens without the approval of banks.
Last week China announced two important measures. Firstly it advised banks and financial intermediaries not to support bitcoins. Now it has advised bitcoin exchanges not to accept yuans. In a sense, China has banned accepting more bitcoins. Given these developments, how do you see the future?
Central banks are trying to understand this phenomenon and its limitations and will deal with it in various ways. What is clear is that they cannot ignore it any more.

What better purpose do bitcoins serve compared to other currencies?
The fact that they are finite, have no intrinsic value and their value is not dependent on any geo politics.

Austrian economist Friedrich A. Hayek wrote some very influential publications, such as Denationalisation of Money (1976), in which he posits that governments should not have a monopoly over the issuance of money. How do you see it as an economist?
Yes they should not and often cannot. But given their reach and the trust that people have in governments, they easily become monopolists in this area.
There is a fear it could be used for stashing black money to funding global terror activities?
This is unfair as any currency can be used in such a fashion, as is now the case.

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Issue Dated: Feb 5, 2017