Cryptocurrencies Are “Junk,” Says MasterCard CEO Ajay Banga

  • MasterCard CEO Ajay Banga has recently bashed cryptocurrencies, labeling them "junk."
  • Per his words, these are used for illicit activities, just like cash, unlike credit cards.

Ajay Banga, the president and chief executive officer of international financial services company MasterCard, has recently argued that cryptocurrencies are “junk,” while seemingly supporting an increase in credit card payments to enforce money as a system of control.

According to a report from the  Press Trust of India, Banga voiced concerns over the number of cryptocurrency transactions being conducted on the dark web, where users often pay for illegal products and services, which include child pornography and credit card fraud.

He was quoted as saying:

I think cryptocurrency is junk. The idea of an anonymized currency produced by people who have to mine it, the value of which can fluctuate wildly - that to me is not the way that any medium of exchange deserves to be considered as a medium of exchange.

Ajay Banga

Banga’s words on cryptos came as he was responding to a question during the “New India Lecture” organized at the Indian Consulate. During his response, he added that cryptocurrencies aren’t a good medium of exchange, as they lack “predictability and transparency.”

In an attempt to show cryptocurrencies aren’t good news, he referred to a recent case that saw 12 Russian nationals reportedly interfere with the US’ 2016 Presidential Elections using Bitcoin.

Per his words, cryptocurrencies like bitcoin are used in these cases and in dark web transactions because of their semi-anonymous nature. He said:

Why civil society would like to put a snake in its backyard and think that somehow the snake will only bite my neighbour, I don't get it.

Ajay Banga

In his arguments, he noted that cash payments should be reduced as the world enters an era of electronic payments. According to the press release, Banga argued cash is used to fund illicit activities, including drug use and terrorism financing, while credit cards aren’t used for such purposes.

Credit cards, presumably, aren’t used to fund illicit activities as their transactions are heavily controlled, meaning financial institutions can unilaterally deny people access to their own money, without proper justification. Nevertheless, Banga stated that “society buys into the logic that cash is free and electronic payments are expensive. Society needs to wake up.”

Notably, the law commission of India recently revealed it sees cryptocurrencies as an “electronic means of payment.” This ,shortly after the country’s central bank, the Reserve Bank of India, pushed the Supreme Court for cryptocurrency regulations.

Elsewhere, Banga noted the world’s governments need to start debating “how open trade should be constructed” while referring to the escalation of a potential trade war between the US and China.

MasterCard itself has earlier this year showed it isn’t too fond of cryptocurrencies, as it blamed them for a slip in its first quarter’s growth. At the time, Banga revealed cryptocurrencies weren’t a part of the firm’s long-term strategy because of their volatility.

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.