Columbia University Economics Professor Joseph Stiglitz says cryptocurrencies should be shut down.
Stiglitz, who won the Nobel Prize for Economics in 2001, told CNBC that he worries that they enable illicit activity by making money transactions less transparent.
He admits he sees the value in digital payments systems and supports electronic use of government-backed currencies like the dollar.
“I’ve been a great advocate of moving to an electronic payments mechanism. There are lots of efficiencies. I think we can actually have a better-regulated economy. If we had all the data in real time knowing what people are spending, it would enable the Federal Reserve to actually set interest rates in a much more efficient way. We would have…better macroeconomic management,” he said.
“I actually think we should shut down the cryptocurrencies,” he said.
“In our standard courses in economics, we talk about the attributes of a good currency and the US dollar has all those attributes. Cryptocurrencies do not have those attributes,” he said.
“If we want a more efficient economy, without these illicit activities, I think we are going to have to move to more of an electronic payments mechanism we are going to have to figure out to have the transparency of the electronic payments mechanism without the dangers of the surveillance and the surveillance state,” he said.
To be sure, there is a seedy side to cryptocurrencies.
Losses from the theft of cryptocurrencies from exchanges and fraud-related activities surged in the first quarter of the year to $1.2 billion, or 70 percent of the level for all of 2018, cybersecurity firm CipherTrace said.
The value of losses from crime in the digital currency sector in 2018 hit $1.7 billion. But cryptocurrency crime has ballooned as the market has slowed down, prices have plunged and business activity has stalled, Reuters explained.
In the first quarter of 2019, theft of digital currencies from exchanges and scams totaled $356 million, while losses from fraud or misappropriated funds amounted to $851 million, the respected U.S.-based CipherTrace said in a quarterly report.
CipherTrace said it included losses at Canadian digital platform QuadrigaX, where roughly C$180 million (US$134 million) in cryptocurrencies have been frozen in user accounts after the founder, the only person with the password to gain access, died suddenly in December.
"Crypto crime has gotten worse because regulations are still weakly enforced. Europe broadly has not implemented its regulations yet and the cyber criminal community continues to grow," CipherTrace chief executive officer Dave Jevans told Reuters.
"I would also add that insider issues such as fraud or theft have grown mostly due to operations outside of the U.S. where regulations are poor, or simply due to greed and mismanagement by young management teams at these cryptocurrency companies that are managing hundreds of millions or even billions of dollars."
However, there are signs of growing general acceptance of cryptocurrencies.
Cryptocurrency dealer Genesis Global Trading recently said it loaned digital assets valued at $1.53 billion to institutional borrowers in the year since it launched its lending business in March 2018, an indication of demand for the emerging lending market for cryptocurrencies, Reuters reported.
Institutional borrowers such as hedge funds and other financial firms have used crypto assets to short digital currencies, hedge investments or finance business operations.
Genesis’ total loans reached $425 million in the first quarter, the company said.
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