Opinion: What Ben Bernanke and other bitcoin skeptics get wrong about crypto — even after this latest crash

Ben Bernanke, former chairman of the Federal Reserve, has been a vocal skeptic about bitcoin BTCUSD,
He asserted that cryptocurrency has no underlying value and cannot act as a store of value, making it unbelievable as a currency.

“If bitcoin were a substitute for fiat money, you could use bitcoin to go buy your groceries. No one buys groceries with bitcoins because it’s too expensive and too inconvenient to do so,” Bernanke said in an interview with CNBC May. “The price of celery varies radically day by day in terms of bitcoin and therefore there is no stability in the value of bitcoin.”

Bernanke is losing the bitcoin point and the more than 10,000 other active cryptocurrencies. Even after this latest cryptocurrency crash, the cryptocurrency is not a reserve of value. It is about creating a global currency.

What is the value reserve and what is the underlying value of the US dollar DXY,
to own? In the case of cryptocurrencies, it is the network we trust. We are confident that it will be able to move value quickly across borders, without government interference. That’s why bitcoin was created and why true bitcoin believers still hold it.

For many years, I have stated that you cannot have money without a government, and bitcoin believers have thrown stones at me. I was accused of being a statist. I am not, as I never said the government should be a national government. Maybe he should have said that you can’t have money without a government, and the point of government is that the community has to believe in who makes the rules.

There is a belief in the power of the net to govern the currency and keep it stable.

In the case of the US dollar, there is still a belief in the United States as a global superpower and that the US economy is stable. In the case of bitcoin, or any other cryptocurrency, there is a belief in the power of the network to govern the currency and keep it stable. There is no value behind the US dollar or bitcoin; just a belief in governance. But that goes further when it comes to cryptocurrencies.

Let’s take a concrete example: buy a house. If you are an American citizen, buying a home in the US with US dollars is quite simple. But if you are a European who is trying to buy a house in the United States with euros, the transaction becomes more complex. The European must arrange a transfer of funds across borders and pay commissions and foreign exchange charges that can cost a buyer as the exchange rate between the euro and the dollar fluctuates.

This money is taken by the intermediary, which is more often a bank or a fintech technology company. The transaction also takes days to settle, as you have to move through the Swift network and clear all anti-money laundering (AML) checks to complete. A good example is a payment I received from an American customer that took a month to be credited to my account, for the reasons listed above.

In contrast, a transfer of cryptocurrency between two users connected to the network can be done in real time, without commissions. This is the point of cryptocurrencies. There is no cross-border currency conversion, and while there may be AML checks, the authorization is immediate, as with a national payment.

What if bitcoin was backed by diamonds? then is it more valuable?

The problem for Bernanke and most of the traditional financial community is that they see bitcoin, dogecoin DOGEUSD,
and other cryptocurrencies as dodgy, rather than real coins. They say that just because you can’t use crypto to buy groceries in a physical store, they don’t see any value behind the coin. My refutation is that it is easy to use these coins online. Also, what is the value behind your accepted currency?

What if bitcoin was backed by diamonds? then is it more valuable? The answer is no. The diamond industry has convinced people that these stones have an underlying value, but in reality they do not. This is true for all gemstones and for example gold, silver and platinum. What you believe has value, has value, and with cryptocurrency, people believe in networked communities.

Ask yourself, what do you think is most valuable: Bernanke and the banking community’s views on crypto, or the 4.65 billion people — two-thirds of the world’s population — who live on the Internet?

Chris Skinner is an independent fintech commentator through his blog, Finanser.com. His latest book, Digital For Good: Stand for Something … or You Will Fall (Marshall Cavendish Business, June 2022), explores the use of technology and finance to improve society and the planet.

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