Crypto Crunch Time – Project Syndicate

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Jul 29, 2021

The likelihood that the world’s major central banks will sooner or later issue their own digital currencies has led to increased scrutiny of existing private players in the industry. Sooner or later cryptocurrency enthusiasts who have long argued that politicians would never dare to regulate Bitcoin and that others will have to think again.

In this large image, former Greek Finance Minister Yanis Varoufakis argues that Bitcoin-like central bank digital currencies (CBDCs) would make money more secure, transparent and democratic. But Anne O. Krueger of Johns Hopkins University, while noting the potential benefits of CBDCs in financial inclusion, urges policymakers to face several predictable risks before introducing them.

Still, CBDCs can nonetheless be a safer bet than private cryptocurrencies. Barry Eichengreen of the University of California, Berkeley, warns that digital coins tied to the US dollar are more likely to destabilize than revolutionize financial markets. Likewise, Katharina Pistor of Columbia Law School describes Facebook’s failure to launch a global digital stablecoin as a premature and ill-conceived attempt to challenge the monetary powers that be.

That hasn’t stopped even some rulers from trying. Paola Subacchi of the Queen Mary Global Policy Institute at the University of London explains why El Salvador’s recent move to adopt Bitcoin as legal tender alongside the US dollar threatens to do more harm than good. And Harvard University Kenneth Rogoff lays out some of the main risks, arguing that the role of cryptocurrencies in recent ransomware attacks and in facilitating the global underground economy more broadly could finally push regulators to to act.

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