Sen. Elizabeth Warren doubts bitcoin as inflation hedge, wants tighter regulation

Senator Elizabeth Warren told CNBC on Wednesday that she was skeptical that bitcoin would prove to be a reliable hedge against inflation in the long run, a major reason some investors choose to own bitcoin.

“People can make their own investment decisions, but that kind of assumes two things. For one, what happens to Bitcoin or some other cryptocurrency is somehow separated from what is happening elsewhere in the economy, ”the Massachusetts Democrat, a frequent Wall Street and crypto critic, said on Squawk Box.

The second assumption, according to Warren, is that “crypto coins will not have their own inflationary pressures”. She contradicted such a notion, saying that inflation “could come from a source other than what is happening to dollars, but look at what happened with the high volatility of the price of these things”.

“The idea that they are somehow a protection or a hedge, in my opinion, is not going to be confirmed over time,” she added.

Many crypto bulls believe that Bitcoin is a permanent, long-term store of value that offers protection from what they see as excessive government spending on the extremely accommodating monetary policies of global central banks that are causing problematic high inflation. Their reasoning is that the eventual delivery of Bitcoin is limited to 21 million tokens. The world’s largest cryptocurrency by market value currently has 18.77 million tokens in circulation.

New bitcoins come onto the market when so-called miners use high-performance computers to verify transactions via the blockchain, a decentralized digital ledger. This reward is systematically reduced approximately every four years in a technical event known as a “halving”. The last one occurred in May 2020.

Many critics, including Warren, point to Bitcoin’s penchant for wild price fluctuations, believing that this undermines Bitcoin’s premise as a store of value.

In recent months, concerns about inflation have risen in the US and other parts of the world as economies gain momentum from the pandemic-induced slowdown. With that in mind, however, Bitcoin plunged from its all-time high of $ 65,000 in mid-April to below $ 30,000 this summer. Bitcoin was trading near $ 40,000 again on Wednesday morning.

Mike Novogratz, founder and CEO of crypto financial services company Galaxy Digital, told CNBC on Wednesday that he believes theories about Bitcoin’s store-of-value potential are yet to be shot down.

“Bitcoin is 13 years old, so we are very early to adopt these new technologies and these new assets. People buy Bitcoin because they fear our fiscal and monetary policies will get out of hand. So yes, it’s a broader currency depreciation hedge. It is a broader devaluation hedge for fiat money. This is primarily an inflation hedge from the consumer price index, a monthly inflation measure published by the US Bureau of Labor Statistics.

Warren wants to exterminate “snake oil sellers”

In the far-reaching interview, which also addressed her proposal on wealth tax, Warren called for stricter regulation of cryptocurrencies and suggested that this will help eradicate “snake oil sellers” and increase investor confidence in the emerging asset class.

She likened it to the founding of the Food and Drug Administration in the early 20th century and the agency’s crucial role in regulating drugs and treatments.

“One time we really had an FDA that stood up and said, ‘You know what, we’re going to test the drugs before they hit the market. We’re going to reassure the public that they’re safe. Then see what happened. We have a lot more investment and obviously a much bigger market that has helped the whole world, “said Warren, a former Harvard Law School professor and chief architect of the Consumer Financial Protection Bureau.

She denied concerns that increased regulation would stifle innovation for nascent digital assets and blockchain technologies.

“I want people to have the freedom to invest. I just don’t want a system where the big ones, the dark sides, the people you never quite see can go out and do pump-and-dump [schemes]”Said Warren.

“I think the question isn’t just regulation. The question is how it aims. Who takes advantage of the fact that they have no rules? It’s the big ones. Who wins if no cop is on the beat? It’s the big ones, ”she added. “That’s the part that is important to me, and it is important to me that it happens before a lot of people are wiped out.”

In the interview, Warren also gave a new boost to wealth tax, saying, “Yeah, Jeff Bezos, I’m looking at you.”

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