Renowned Economist Joseph Stiglitz: 'We Should Shut Down Cryptocurrencies'

Joseph Eugene Stiglitz, a prominent American economist and the recipient of the Nobel Memorial Prize in Economic Sciences (2001), has argued that the existing financial system would become more efficient if electronic payments were used to settle most transactions.

Stiglitz, who has received more than 40 honorary degrees from prestigious universities including Cambridge and Harvard, believes the world’s financial system and the global economy would be “better regulated if all the data [was accessible] in real-time.”

Using Real-Time Data To Improve The Economy

Stiglitz noted during an interview with CNBC that by analyzing real-time data, we would be able to learn about people’s spending habits and having access to the latest financial information would also help the US Federal Reserve in more accurately determining interest rates.

He added that the availability of the latest financial data would allow for “better macroeconomic management.” According to Stiglitz, an electronic payments system and access to real-time financial data would help prevent "illicit economic activities.”

Cryptocurrencies Moving Monetary Transactions To A "Dark Platform"

However, the former chief economist at the World Bank said “it disturbed [him] a great deal [when] cryptocurrencies” were given a lot of attention. Notably, Stiglitz thinks cryptocurrencies are moving the world’s financial system “off [or away] from a transparent platform and into a dark platform.”

He continued: 

We know about the role of real estate and money laundering. We know from the Paradise Papers, Panama Papers...the extent of this money laundering. We know from research in recent years, [from] the work of [French economist] Gabriel Zucman … the large percentage of global wealth that is held in these dark havens. So, if we want a more efficient economy without these illicit activities, I think we’re going to have to move to more of an electronic payments mechanism.

Stiglitz further mentioned that “we will have to figure a way out to have the transparency of an electronic payments mechanism without the dangers of the surveillance.”

“There’s No Need For Anybody To Go To A Cryptocurrency”

When questioned about whether the USD should also become the world’s electronic reserve currency, Stiglitz said: 

[The USD] is a very good currency…[it] has been running in a very stable way. There’s no need for anybody to go to a cryptocurrency. In our standard courses in Economics, we talk about the attributes of a good currency and the USD has all those attributes. Cryptocurrencies do not have those attributes.

Stiglitz also recommended “shutting down” cryptocurrencies.

PayPal is Cautiously Optimistic About Partnership with Libra Association

  • PayPal cautious about future with Facebook's digital currency libra. 
  • Payment platform was one of the first companies to join and support the Libra Association.

Payment platform PayPal is cautiously optimistic about its relationship with Facebook’s digital currency libra, despite being the highest-profile company to join the Libra Association. 

PayPal Backs Libra Association

In June, shortly after the official unveiling of Facebook’s libra, PayPal announced an intention to join and support the Libra Association, a collection of tech and finance companies promoting the product. 

At the time, PayPal billed the digital currency as a revolutionary product for people around the world, 

We believe in democratizing participation in the digital economy for people from all walks of life, and businesses of all sizes.

However, PayPal appears cautious about its future with Facebook’s digital currency. PayPal investor relations vice president Gabrielle Rabinovitch reiterated Sept. 12 that the company is a non-binding agreement with libra, 

It's a non-binding commitment. And obviously, I think there's a lot of work to happen before we get to that point where it becomes something more than just a very exciting idea.

She added, 

The goals and ambitions of Libra are very consistent with PayPal's overall ambitions in terms of serving the underserved; democratizing access to capital. So we very much believe in the potential of Libra.

While PayPal appears optimistic about the future of libra, the digital currency has endured months of regulatory and political scrutiny concerning its release. 

Earlier in the week, senior U.S. Treasury official Sigal Mandelker told an audience in Geneva that libra would be held to the highest standard of regulatory compliance in order to combat money laundering and terrorist funding.

 

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