back to article Bitcoin doomed as a payment system and its novelty will fade, says Federal Reserve Board of Governors member

The United States doesn't need a central bank digital currency (CBDC) because such a thing will not notably improve the nation's financial system. And also, the US dollar isn't threatened by digital currencies nor other nations' CBDCs, so what's the point? So said Randal K Quarles, a member of the US Federal Reserve's Board of …

  1. amanfromMars 1 Silver badge

    MRDA

    Federal Reserve Board of Governors member says Bitcoin is doomed once the novelty wears off. USA doesn’t need a central bank digital currency, says Vice Chair for Supervision Randal K. Quarles

    He would say that, wouldn't he, however ........ as Napoleon said, never interrupt your enemy when he is making a mistake ‽ .

    “Those who think that they know, but are mistaken, and act upon their mistakes, are the most dangerous people to have in charge." —Margaret Thatcher

    1. Allan George Dyer Silver badge
      Coat

      Re: MRDA

      Umm... can you clarify, is that a quote by Margaret Thatcher, or a quote about Margaret Thatcher?

      1. amanfromMars 1 Silver badge

        Re: MRDA introducing WTFCUK Terrestrial Vision

        Umm... can you clarify, is that a quote by Margaret Thatcher, or a quote about Margaret Thatcher? .....Allan George Dyer

        Quantum Communication permits that, and supplies at least both of those distinct possibilities which when similarly realised and activated together are able and further enabled to forge ahead in countless others for Live AI Presentations ...... and your Key to Command and Remotely Control Others to Unprecedented and Unpresidented Success with Quantum Leaps into Other MisUnderstandings Recognising the Power and Energy of the Understanding of Others Returning to Convey the Enlightened Ways at Perfect Peace with All A.N.Others.

        Keeping IT Simple Guarantees Everything Works Faultlessly ....... or as near to that as makes no difference.

        El Reg, there's a lot going around you. Jumping in Anywhere with Something that was formerly Nothing, is a Lead to Exercise and Enjoy :-)

  2. Mark192

    It's the usefulness

    "Federal Reserve Board of Governors member says Bitcoin is doomed once the novelty wears off."

    It's the usefulness, not the novelty, that makes bitcoin successful.

    Make a better tax free, secure (& secure from the taxman), reliable and quick way to move value around and it'll become worthless.

    Make something with the above that can also handle low value payments at sufficient scale and we'll have something that'll be sufficiently useful that it'll start to replace currencies.

    1. Sorry that handle is already taken. Silver badge

      Re: It's the usefulness

      You just described a black economy and governments don't like those very much. Not to mention civilised societies not liking most of a black economy's uses.

      1. Steve Davies 3 Silver badge

        Re: the black economy

        I guess that is why Elon 'yes, I do smoke dope' Musk loves it so much?

        Anything for a fast $$$$ that the IRC can't track. No different to all really rich dudes then.

        1. DrXym Silver badge

          Re: the black economy

          Does Elon love bitcoin for its own sake or because of how the rubes react to his pump and dumpesque tweets?

          e.g. a dank meme one day causing the price to surge and then next day saying how bad it might be for the environment causing it to plunge. Someone in his position could easily time his buy & sells to make tens, or even hundreds of millions of profit from that reaction.

          1. amanfromMars 1 Silver badge

            Re: the black economy

            Such has one wondering why he doesn't indulge himself and fully immerse himself in that sort of thing much more than just more often/constantly ?

            Maybe IT is Magnificently Tiring Requiring Multiple Rests with Future Assets ....... which would a right hot bed of burning thoughts with some of a diabolical nature and virtual presence, presented for inspection and judgment as to whether of Future Worth to Follow.

      2. Marcelo Rodrigues

        Re: It's the usefulness

        "You just described a black economy and governments don't like those very much. "

        No, he described something like we have in Brazil: the PIX. I believe (although I'm not sure) that others countries have something similar.

        It is an instant electronic transfer of money, between bank accounts. It can be used to transfer money to someone, or to pay for services/goods.

        The PIX itself is free: no costs whatsoever. The speed is astounding: usually takes (way) less than 20 seconds to clear the transaction - from one bank to another, or to the seller get my payment.

        Of course, You will pay the same taxes as any sale. But this isn't because of PIX, it's because You sold something.

        I don't think You can use it to send money abroad, but I may be wrong.

        PIX isn't anonymous

        PIX isn't cryptocoins

        PIX is just a system that allows me to pay/transfer my money. Like a wiretransfer, but free of charge and instant.

        1. Pascal Monett Silver badge

          Re: It's the usefulness

          In France, Luxembourg, Belgium, Germany and, I'm guessing, all of the EU, banks allow you to transfer money to any IBAN account number.

          You just log on to your online account portal and type in the order, confirm it and it's done.

          It baffles me that there are so many people in the world who need ad-hoc services for something that should be offered by the banks themselves.

        2. Sorry that handle is already taken. Silver badge

          Re: It's the usefulness

          PIX is operated by the Central Bank of Brazil, i.e. with government oversight. That makes tax avoidance and money laundering difficult. Cryptocurrencies, by contrast, are designed to (among other things) be deliberately opaque to the authorities.

      3. Al Black

        It's the usefulness

        Cryptocurrency is useful only for illegal transactions such as buying drugs or weapons, money laundering and ransomware payments to organised crime. Society doesn't need cryptocurrencies or their users. Banks around the World should be forbidden to trade Bitcoin, Etherium, Litecoin, Zcash, Dash, Ripple and others like them for cash. Its novelty would fade fast if it couldn't be converted into real currency. As a bonus, criminal gangs would lose the fortunes they have tucked away in digital wallets, which would be a great outcome for the common good.

        1. Charles 9 Silver badge

          Re: It's the usefulness

          How would you enforce it? Countries have sovereignty, and as soon as one does it (especially one like Singapore--tiny and therefore low-maintenance as well as a tourist destination, especially for the rich, and therefore awash in multiple currencies--IOW, try and stop them), everyone else risks being left behind...

          1. Blank Reg Silver badge

            Re: It's the usefulness

            It actually wouldn't be that hard to enforce.

            If the g7, or better yet the g20 all forbid any crypto-related activities by their banks, and forbid them from even dealing with foreign banks that do, then crypto is dead.

            And then there is the Bank for International Settlements, if they forbid members from any crypto transactions then it's dead.

            1. myfacelaunched100ships

              Re: It's the usefulness

              Impossible to enforce. It would be very controversial to enforce a ban on these public blockchains that are used as trust sources for many business applications that have nothing to do with bitcoin currency. The courts in the US would never allow regulators to harm a security source that many businesses worldwide depend on for security.

              1. doublelayer Silver badge

                Re: It's the usefulness

                You won't find as many blockchains as you think exist. Most companies claiming to use blockchain are not really operating a public one as you consider. Also, it's irrelevant to the point. If a bunch of countries agreed to block transactions in cryptocurrencies like China has done, they don't have to do anything to noncurrency blockchains. I don't think it's likely to obtain an agreement as has been suggested, but if that happens, your objection will not prevent it in the least.

              2. Sorry that handle is already taken. Silver badge

                Re: It's the usefulness

                What "public blockchains that are used as trust sources for many business applications"?

        2. Michael Wojcik Silver badge

          Re: It's the usefulness

          Ethereum (note the spelling) is a blockchain smart-contract1 platform. Ether (ETH) is the official cryptocurrency implemented on the Ethereum platform, but Ethereum is also used to implement other cryptocurrencies.

          Blocking the conversion of Ether to government-backed currencies, assuming you could do that, would not destroy the exchange-value of Ether. There's a huge amount of money tied up in Ethereum smart contracts – currently over $52B USD, according to ethereum.org's dashboard, and various academic papers have supported their figures in the past.

          In any case, your argument doesn't hold in general. There's ample historical evidence of "bottom-up" currencies succeeding in the long term in large, distributed markets, from Mesopotamian clay balls to Arabian trading letters to (with many reservations and caveats) the continuation of the Somali shilling during the stateless period by the informal banks of the Bakaraha market and the Hawala. People with no better alternative will use risky, non-convertible currencies because they're still superior to direct barter for many use cases.

          I'm not a fan of cryptocurrencies, but I don't use that as an excuse to make simplistic pronouncements about them.

          1Yes, they're neither smart, nor contracts. But that's the terminology we're stuck with.

        3. myfacelaunched100ships

          Re: It's the usefulness

          The bitcoin and ethereum blockchains are used extensively not only for value transfers but also for trust services like settling smart contracts, validating easily forged documents and trust anchoring private blockchains and databases. They have become an essential world wide resource for trust services and so no court will ever allow regulators to harm them and put at risk the viability of enterprises that depend on them for security.

          So say good bye to your dream of having bitcoin banned.

    2. Potemkine! Silver badge

      Re: It's the usefulness

      It's the usefulness, not the novelty, that makes bitcoin successful.

      As paying ransom from desperate companies which have been crypto-locked?

      1. OopsAgain

        Re: It's the usefulness

        Although, as that was traced and recovered, shows BTC isnt so useful as a ransom currency

      2. amanfromMars 1 Silver badge

        Re: It's the usefulness :-) an absolute joy to behold and bestow

        As paying ransom from desperate companies which have been crypto-locked? .... Potemkine!

        That's just the premium likely to be enthusiastically paid for market insurance against total information loss and/or revelation. There Real Wealth and Piles of Paper Money to Generate for Protection of Sensitive Stealthy Secrets Abroad ..... AI Pathfinding, which is extremely useful being a monumental misunderstatement of the scope of vital helps available whenever Tip Top Secret Expert Researching Base ICQ IT Tasks and AI Services.

    3. MachDiamond Silver badge

      Re: It's the usefulness

      It can be very useful for totalitarian regimes. Every "coin" can have the ability to be tracked from point to point. A little pattern analysis and your money gets tagged as criminal one day. The men in the tactical warfare garb will show up to let you know you have a lot of 'splaining to do.

      If you read between the lines, it rather obvious that crypto is not as secure as people believe. Nothing will be unless your opsec is flawless. Just ask Dread Pirate Roberts. There have been a couple of raids on tumblers. You want to hope they weren't keeping meticulous records.

      1. chuBb. Silver badge

        Re: It's the usefulness

        I've always viewed it as a solution looking for a problem.

        The fact it came with a manifesto and suffered from the same flaws as the communist manifesto of not accounting for human greed; coupled with a provocative to any government ability to enable money laundering at a much lower technical cost than usual means it will always face more scrutiny for legit uses, than any other form of value, which will always be passed on with extra transaction charges and friction and thus be unattractive for day to day transactions.

        As for its claims of a anonymity maybe while inside the network( but there will always be a side channel to exploit and correlate from) , but much like tor the entry and exit points are not and do interface into systems which don't protect identity

        1. myfacelaunched100ships

          a solution looking for a problem?

          It is has achieved the holy grail of world commerce-- a bearer asset that settles instantly worldwide with no counterparty risk.

          Additionally, on some days 20% of transactions in the blocks consist not of bitcoin transfers but hash proofs verifying weaker private blockchains, business documents or settling programmed contracts. In short bitcoin is solving problems for which it was not intended which, like the invention computer and the internet, are indications that it is like those examples an important human achievement.

          1. chuBb. Silver badge

            Re: a solution looking for a problem?

            Yeah your describing block chains in general, not any intrinsic property of BTC

            Whatever future crypto has it won't be in its current form, and given the difficulty of say applying for a mortgage with crypto funds and proving at no point was your coin/token was/has/is used in money laundering its not very useful.

            Given the inevitable regulatory crackdown on it, btc will end up a hotel california of investments for who ever didn't get out before it hits the fan...

            1. myfacelaunched100ships

              Re: a solution looking for a problem?

              "your describing block chains in general, not any intrinsic property of BTC"

              Wrong. I'm describing the bitcoin blockchain specifically. How can I mean blockchains in general when I say explicitly the BITCOIN blockchain is recoding these trust links?

              It is only the bitcoin chain where applications seeking bulletproof security record their hash proofs to validate their private blockchains and databases. There are no "general" blockchains that provide security. All general (private) blockchains are merely shared databases that record business data in its "blocks" which is then validated by employees of the blockchains owner who can be persuaded to alter the blockchain's data by a judicial order, men with guns or hackers who steal the login credentials of the blockchain validators. This is the total opposite of bitcoin because bitcoin is impervious to courts, police, armies, hackers or any action of the state.

              To help you understand this distinction you should look at a real life example-- the Microsoft ION project which chose the bitcoin blockchain as the trust anchor for its decentralized personal ID management system. https://www.coindesk.com/micorosfts-ion-digital-id-network-live-bitcoin

              ION was developed to allow internet users to use a single ION ID in place of a userid/password for logon credentials anywhere on the web. Since the ION ID data is decentralized, i.e., not on a Microsoft server the data must be authenticated by a source that is impossible to hack, always available, untouchable by any government or dictator and available to anyone without special permissions. Only the bitcoin chain can provide this kind of service.

              So with the bitcoin chain guaranteeing the security of the personal ID accounts of millions of private citizens don't expect regulations of bitcoin that would do any harm to the bitcoin network. The courts would not allow it.

              1. chuBb. Silver badge

                Re: a solution looking for a problem?

                Yeah if you say so, enjoy the coolaid flaw in your argument is you mistake available for accessable, btc is nothing special, ms's use of BTC is pure marketing napster and kazzaa were decentralised networks that doesn't preclude infiltration or guarantee security

          2. doublelayer Silver badge

            Re: a solution looking for a problem?

            You are incorrect.

            "It is has achieved the holy grail of world commerce-- a bearer asset that settles instantly worldwide"

            Doesn't settle instantly. Settles slower than other resources, in fact.

            "with no counterparty risk."

            Wrong for most transactions, as there are many possible counterparties which are used during transactions. Wrong in a legal sense, as the responsibility to involve governments is still there in legislation. Very wrong in practice, as for most transactions, one or both sides are represented by third parties which handle exchanging operations between the crypto and the currency that the person actually desires.

            "Additionally, on some days 20% of transactions in the blocks consist not of bitcoin transfers but hash proofs verifying weaker private blockchains, business documents or settling programmed contracts."

            That's just wrong. Bitcoin doesn't do any of that stuff. You can do it yourself and embed it in the blockchain, but A) it is not the case that 20% of transactions do so and B) this doesn't really do anything more than public key cryptography already did. It's just another way of publishing such things.

            Your idealism is nice, but idealists who don't know what they're talking about get nothing done.

            1. myfacelaunched100ships

              Re: a solution looking for a problem?

              "That's just wrong. Bitcoin doesn't do any of that stuff. You can do it yourself and embed it in the blockchain, but A) it is not the case that 20% of transactions do so and B) this doesn't really do anything more than public key cryptography already did. It's just another way of publishing such things."

              https://www.coindesk.com/micorosfts-ion-digital-id-network-live-bitcoin

              I leave it to you to calculate how many hash proofs will be recorded on the blockchain as ION adds millions of personal ID accounts. Your big take away from having your nose rubbed in your naivete should be don't get all your information from the mainstream financial media because they never report on new business use cases for the bitcoin blockchain.

              1. doublelayer Silver badge

                Re: a solution looking for a problem?

                Easy enough. Given the transaction rate of Bitcoin, just adding the millions of identities you think should exist will take forever unless you trust someone else to batch them. There's a problem with Bitcoin which makes your desired outcome less likely. Blockchains have their place, but the speed is one problem that's not getting solved on Bitcoin's.

    4. Anonymous Coward
      Anonymous Coward

      Re: It's the usefulness

      Tax evasion isn't a good look these days, not at a corporate level - Amazon, Microsoft et al - nor, by extension, at a personal level. I've been guilty in the past myself, but it hollows society out, and I regret it.

      I'm looking forward to a few high profile prosecutions resulting from Bitcoin not being quite as anonymous as people thought.

      1. Anonymous Coward
        Anonymous Coward

        Re: It's the usefulness

        Tax evasion isn't a good look these days, not at a corporate level

        Tax evasion is never a good look, it's illegal.

        Tax avoidance, however, is all the rage. Even your pension fund does it.

        1. Anonymous Coward
          Anonymous Coward

          Re: It's the usefulness

          I'm aware of the difference, thanks. But when Microsoft pays no corporate tax on €260bn profit, I'm feeling pretty justified in calling that evasion. A law that says otherwise is an ass.

          1. Anonymous Coward
            Anonymous Coward

            Re: It's the usefulness

            So fix the law, don't just play woke games with words.

            1. Anonymous Coward
              Anonymous Coward

              Re: It's the usefulness

              I can't quite work out if you think "woke" means some sort of snowflake expectation that corporations pay their taxes (and perhaps you could explain why you are against this concept), or if you just like putting "woke" randomly into sentences to make them feel a bit more edgy.

              1. Anonymous Coward
                Anonymous Coward

                Re: It's the usefulness

                The previous poster has decided that because (s)he feels that it's not fair for companies to use existing tax laws to legitimately reduce their tax bill, (s)he can redefine "avoidance" to mean "evasion" to be more "edgy" as you put it. That's exactly what the "woke"/PC crowd do, redefine words to mean what they want so they can protest about it.

          2. Dave314159ggggdffsdds Silver badge

            Re: It's the usefulness

            " when Microsoft pays no corporate tax on €260bn profit"

            That never happened. It's not 'when', it's just a far right fantasy.

    5. anthonyhegedus

      Re: It's the usefulness

      It’s not useful or convenient - unless you’re a crook

      1. myfacelaunched100ships

        Re: It's the usefulness

        Or unless you're Microsoft needing security source for a distributed personal ID management system.

        https://www.coindesk.com/micorosfts-ion-digital-id-network-live-bitcoin

    6. doublelayer Silver badge

      Re: It's the usefulness

      You are exactly correct--it is the usefulness on which its future as a currency relies, which is why it isn't used as a currency very often and won't be. Let's review what usefulness means to you and why Bitcoin isn't doing it very well.

      "Make a better tax free, secure (& secure from the taxman),": Alright. I admit I have a part of me which likes the idea of a regulation-free currency which can't be tracked, even by the government. Mostly because I am honest and if I don't think too much about others not being honest, I can pretend not to notice the problems. I am willing to pay the taxes due, so everyone else will voluntarily, right? The problem is that governments and those citizens who do pay tend to take a dim view to people who evade taxes. They also take a dim view to people who avoid taxes very successfully (if you want to argue that point, the argument is in another thread already, go there). So trumpeting Bitcoin's advantage starting with "You can evade taxes easily" is not going to convince many people. Also, it doesn't work well for that purpose, but we'll get to that.

      "reliable and quick way to move value around": No, it's not. We have that in lots of financial systems, but Bitcoin in particular is quite bad at that. Money does move eventually, but it takes a lot of time and transaction fees to get it there. Worse, Bitcoin's speed can't be increased without redesigning large chunks and having everybody agree on doing so. Some cryptocurrencies are better at this, but a blockchain is going to be expensive to update even for more efficient ones. We have figured out how to move big chunks of money quickly and reliably through our existing payment processing systems. They're far from perfect, but Bitcoin is not better.

      If you want a currency, Bitcoin is failing at basically everything a currency should do. Other cryptocurrencies are better at some of them, but you have to realize the disadvantages and try scaling them up to a much larger number of individual users before you can claim victory.

      1. myfacelaunched100ships

        Re: It's the usefulness

        Bitcoin is the only financial system that allows a $1M to transfer to an untrusted party internationally with no risk. All others require days and high costs.

        1. Anonymous Coward
          Anonymous Coward

          Re: It's the usefulness

          Surely the risk is that tomorrow it's worth a lot less than $1M because Elon tweeted again?

          1. Michael Wojcik Silver badge

            Re: It's the usefulness

            Among other risks, such as wallet loss and theft, blockchain subversion by network partitioning, and so on. Not to mention secondary risks in attempting to make use of that stored value.

            Anyone who thinks BTC or any other cryptocurrency is without risk is naive or deluded.

            1. Blank Reg Silver badge

              Re: It's the usefulness

              "naive or deluded"

              Crypto-currencies rely on such people for it's existence.

    7. Michael Wojcik Silver badge

      Re: It's the usefulness

      Make a better tax free, secure (& secure from the taxman), reliable and quick way to move value around and it'll become worthless.

      Hell, even in the (bottom-up, i.e. not state-controlled) cryptocurrency realm there are many options superior to BTC, such as Ether (which at least has the financial strength of Ethereum behind it) and any number of stablecoins (which come in great variety). This claim is prima facie bogus.

      BTC's value isn't meritocratic. It's the result of volume and velocity (i.e. people are using it now), name recognition, and to a lesser extent deflation.

    8. myfacelaunched100ships

      Re: It's the usefulness

      Bitcoin succeeded the same reason Christianity succeeded-- it allowed unrestricted entrepreneurism.

    9. Mark192

      Re: It's the usefulness

      Hmmm, 41 thumbs down to my comment. Every critical response missed the point.

      Bitcoin is not a novelty. Paying 10,000 for a pizza was a novelty. Now it is genuinely useful.

      It's not useful to me. Probably not useful to you. That's not relevant.

      One responder said I was describing the black economy.

      Yes. I was.

      Is the black economy a novelty? One that'll wear off as people grow bored of it?

  3. DrXym Silver badge

    Obviously

    If I wanted to move a bitcoin from one wallet to another, even between two wallets I own, I'd be charged a "transaction fee" which is like a congestion charge. The average fee is a small fraction of a bitcoin but in real money it is about $8.

    So NOBODY is going to use bitcoin for anything that is remotely related to day to day financial activity because who is going to use Bitcoin like a credit card when they get stiffed like this?

    Some platforms might offer internal trading on a spread basis, internally matching buy/sells between users and buying / selling bitcoin in bulk to lower the price, but the fundamental issue is still there. And it also means in practice you own NOTHING if the platform crashes or the operator goes AWOL because all the money is in their wallet, not yours.

    1. Michael Wojcik Silver badge

      Re: Obviously

      Yes, these are both valid problems with BTC, and with Bitcoin-style cryptocurrencies and some other public blockchain applications.

      We could also add the volatility problem (as the article noted), the ease of committing fraud (as we've seen time and time again), and the general Ponzi / hot-potato issue – you don't want to be late getting out of it when it loses popularity.

      There are more-obscure issues as well, such as the problem that holding a copy of the Bitcoin blockchain is illegal in many jurisdictions because of outlawed, non-BTC-transaction content people have added to it.

      There are structural issues, such as BTC's built-in deflation. There are implementation weaknesses, such as vulnerability to network partitioning. There's the environmental cost.

  4. knarf

    IIts Gambling... mostly

    or fools gold, get rich quick, ponzi schemes, money laundering and a novelty.... take you pick.

    What it is not is a currency. 1 BTC does not have a defined value in a geographic location. And there are the transaction fees for every transfer who would really put up with that with really money.

    We already have digital currency be it USD, EURO, GBP, AUD etc..... I rarely use cash and rarely actually have any on me from month to month.

    1. werdsmith Silver badge

      Re: IIts Gambling... mostly

      It's not a national currency. But currency of nations is one definition that doesn't entirely cover the meaning of currency.

      It's a currency if it's a medium of exchange that people are willing to use.

  5. Binraider Bronze badge

    BTC's useful features are sooner or later going to be countermanded by the high transaction cost and increasingly slow performance; prompting a shift to other crypto for anything other than a unit of speculation.

    Other crypto designs already provide a far more useful service; their speculative value only a function of how much has been dumped into various exchanges by speculators.

    When the three major features of crypto are that they facilitate proceeds of crime; facilitate tax evasion and also function as a pyramid scheme under another name, how long will it take for it to be smashed down by the establishment?

    China is taking an axe to it, and the equipment is already moving next door to Kazakhstan. One suspects our establishment has a vested interest in the pyramid scheme itself for not to have taken an axe to it just yet.

    Writing good regulation around this, at national and international level would keep lawmakers in work for a very, very long time. I'm only surprised it hasn't yet gone on the agenda.

    I quite liked the Dogecoin idea of the unit being fundamentally valueless; though speculation has broken that too!

    1. Aitor 1 Silver badge

      Gold

      BTC is not a good crypto, but is the one that appeared first.

      So it is the "gold standard". It is terrible for transactions, but can be used as a reserve, the same way gold can. Also, moving gold arround is quite expensive, so people just move certificates, mostly.. someone is keeping it for you, even between countries: same can be done with wallets.

      The main reason governments don't like cryto is not privacy. Nothing less private than a public ledger! The reason is governments print money. Literally take cloth/plastic and make money, with little cost. On top of that,. using interest rates they control monetary scarcity/supply.

      If other people essentially start "minting coin", this takes one of the main sources of power out of the government.. and it is the government/mps/etc who create laws and control the economy.. they won't allow other orgs to do so.

      Are there tulip runs with cryto? of course.

      Is it private? no, it is the opposite of private, it is PUBLIC.

      Also, the economy is waking up and electricty is needed, so another reason not to allow serfs to mint coins.

      1. Dave314159ggggdffsdds Silver badge

        Re: Gold

        "If other people essentially start "minting coin", this takes one of the main sources of power out of the government"

        That part isn't true. The BoE is independent precisely because we don't want to give politicians that power.

        Other than that you're right, Bitcoin is a scam and the claims made about it are not only untrue, but obviously untrue. It isn't private, it isn't secure, it isn't usable as money, etc etc.

        1. myfacelaunched100ships

          Re: Gold

          "It isn't private, it isn't secure, it isn't usable as money, etc etc."

          But it is good for securing data on other private blockchains and databases which is why governments will never be able to harm it with excessive regulations. For instance many universities have been issuing degree credentials to graduates that are proven authentic by hash proofs on the bitcoin blockchain. Since the only copy of the documents exist on the graduate's devices and cloud backups the destruction of trust on the bitcoin chain would invalidate these degrees.

      2. Blank Reg Silver badge

        Re: Gold

        It's not even good as a reserve, when markets tanked last year, bitcoin tanked twice as much. Gold on the other hand did quite nicely. It helps that gold actually exists and has real world uses, though of course the value of gold also relies on speculation for a good chunk of it's value.

    2. Charlie Clark Silver badge

      All the cryptocurrencies attempt to compete with natonal currencies and circumvent regulatory systems: it's what Silicon Valley loves most. But any cryptocurrency that is based upon and inviolable blockchain is, over time, because of the increasing cost of transactions. Basically, they're just snake oil.

  6. IHateWearingATie

    Useless for day to day transactions

    In my day to day transactions (e.g. getting paid by my employer, buying groceries etc) I have no use for a currency whose value can vary in such a large way day to day and week to week. Does inflation devalue my currency? Definitely, but its not Venezuelan proportions where I could lose half the value of my wage a week after being paid it.

    1. Anonymous Coward
      Anonymous Coward

      Re: Useless for day to day transactions

      Certainly if you are wealthy, but if you live in the UK and Bitcoin is banned then just start buying a few houses each week.

  7. Plest Bronze badge
    Facepalm

    Nothing more than a "posh" form of backing the gee-gees

    The only thing I've seen Bitcoin do recently is heighten the number of people seeking support from gambling/finance support charities 'cos they had no financial experience with risk and lost thousands gambling the markets they don't understand. When are people going to learn, 95% of the news of a share or currency gravy train comes a split second before those in the know suddenly jump off having made their pile!

    Wake up! There's a reason fund and portfolio managers get paid a lot of money and have teams of researchers to help them, it's so they don't piss money up the wall all the time. Trading is nothing more than gambling, we can't avoid it 'cos that's how a lot of our savings are invested, especially pensions but we trust those who've been trained in risk management to do a good job and most of the time the vast majority do it well.

    Average Joe Sixpack having watched a couple of YouTube vids on investment and has £10k on the hip is probably more likely to lose than win when they back the trade equivalent of a blind, 3-legged nag on the trading app they just signed into.

    1. Charles 9 Silver badge

      Re: Nothing more than a "posh" form of backing the gee-gees

      "Wake up!"

      Forget it. They're much like the people I see all the time hammering away at slot machines and "skill games" like they're arcade shooters, plunking away all their cash in the blink of an eye, then hobbling themselves off to the ATM machine to do it all over again.

      At all hours of the day.

      Even during the whole COVID thing.

      With their buddies. WithOUT their masks on.

      Basically, some people will just never learn. The worry is that they'll take the rest of us with them...

      1. Dave314159ggggdffsdds Silver badge

        Re: Nothing more than a "posh" form of backing the gee-gees

        " the people I see all the time hammering away at slot machines"

        Most of those are money-launderers at work. I pity the poor fools who see them do it and think they're there to win, so try and 'copy' them.

        1. Charles 9 Silver badge

          Re: Nothing more than a "posh" form of backing the gee-gees

          I would be interested to see how constantly losing money is money laundering. Besides, many of the ones I see don't seem to have homes...

          1. Dave314159ggggdffsdds Silver badge

            Re: Nothing more than a "posh" form of backing the gee-gees

            "I would be interested to see how constantly losing money is money laundering."

            Because they're fixed odds betting terminals, so you know exactly how much you will lose as a percentage of what you put in. The machines or betting shops can give paperwork proving your 'win' when you cash out.

            In other words, you put in unlaundered cash, and take out 80% of that (or whatever the return is, it may well be a lot higher), with paperwork saying you 'won' it gambling. It's much cheaper than most forms of money laundering, where getting back 10-20% is considered very good.

            "many of the ones I see don't seem to have homes..."

            Yes, that's the sad part. Some people on the bottom of society have been fooled into thinking the money launderers are winning, rather than happy to lose, and are trying to copy this 'winning' behaviour.

  8. khjohansen

    Crypto will be around for a while ...

    Certain "investors" are willing to accept the risk/loss as they are comparatively modest compared to other

    more traditional means of international transfer/money laundering. The "small timers" serve as smoke screen.

    Just be aware that "investing in Crypto probably means supporting drugs/arms trades & other iniquity

    1. stiine Silver badge
      Mushroom

      Re: Crypto will be around for a while ...

      Yeah, and paying taxes pays for killing people all over the world, or whereever your government decides to kill them. Remember Nagasaki and Hiroshima?

  9. Marty McFly Silver badge
    Pint

    This is laughable!

    Does anyone here think that the government would have killed Bitcoin (and other crypto currencies) years ago if they could?

    Yeah, exactly. And the fact that it is still around means it cannot be killed. The only hope they have is to try and mis-represent it with statements like this FRB member is making. The very nature of a FRB member addressing Bitcoin in a speech legitimizes it. If it was nothing, they wouldn't make an issue out of it.

    Let's check back here in a few years. I think BTC is just getting started. Wait until it is 7-8 figures per coin and we will reflect back to the days it was 'only $60k' each.

    1. doublelayer Silver badge

      Re: This is laughable!

      "Does anyone here think that the government would have killed Bitcoin (and other crypto currencies) years ago if they could?"

      My hand is down. I don't see why they would have cared all that much. They don't need to go to massive efforts to prevent it being used as a currency because it's really bad as a currency. Also, most democratic governments don't pretend to care about investment quality like China is pretending to, so since it's not in itself fraudulent, they don't need to ban it for that reason either. Maybe I could see a conspiracy to destroy a cryptocurrency that actually worked and proved popular among the general population, but not for Bitcoin. Even in that case, it would come late in the process.

      I doubt that the governments of which you speak have been dedicating time to destroying Bitcoin. Its survival is thus unsurprising and doesn't guarantee any kind of resilliance.

    2. Dave314159ggggdffsdds Silver badge

      Re: This is laughable!

      "Does anyone here think that the government would have killed Bitcoin (and other crypto currencies) years ago if they could?"

      No. It's either a honeytrap the NSA is running, or just insignificant. The NSA - and other nations' equivalents - has enough computing power to subvert the blockchain any time they want. But they don't want, because they're only too delighted if stupid criminals use something with _a public transaction record_ because they think it's untrackable.

      1. myfacelaunched100ships

        Re: This is laughable!

        Western governments could not subvert the block chain with a 51% attack without appropriating the $1.5B in hash power through the legislatures, something that would never happen. Russia could not afford to $1.5B for a one off act of vandalism that would result in nothing. China also. The network would fork around the vandal hardware and the miscreants would have created nothing.

  10. myfacelaunched100ships

    Federal Reserve's Ignorance of the Subject is Appalling

    With the bitcoin blockchain being used as the trust anchor for more and more business applications it is astonishing that an official would say it has no use other than speculation and money laundering. What the bitcoin skeptics like Quarles are ignoring is that the same security mechanism that prevents tampering of bitcoin value transfers provided by the mining network can also be used to prevent tampering of any data. Many applications have been created to exploit this feature to authenticate easily forged documents like diplomas and certificates of origin, or to secure external private blockchains.

    The killer app for bitcoin as a trust platform is the Microsoft ION project which uses the blockchain to authenticate millions of personal ID accounts of private citizens. ION is a totally decentralized ID management system that was developed to allow users to use a single ION ID in place of a userid/password for logon credentials anywhere on the web.

    But whether the Federal Reserve remains clueless about bitcoin or not their opinions will have no effect since the courts will never allow federal regulators to harm a network that secures the personal ID information of millions of Americans.

    1. doublelayer Silver badge

      Re: Federal Reserve's Ignorance of the Subject is Appalling

      You perhaps overestimate what the blockchain provides for this. For example, let's take your validating diplomas case. If you're afraid that you're going to be presented with a fraudulent diploma, you will be asking a number of questions about the document you receive:

      1. Is this a real diploma?

      2. Are the details on this diploma unchanged?

      3. Is the person presenting this diploma the person who was given the original?

      Blockchain is not very useful in answering these questions. Cryptographic signing is useful for points 1 and 2, but the signature doesn't have to be stored in something decentralized or public. The diploma is issued by a single place. It could carry a signature validating it, and the issuing institution just publishes their public key so you can verify it.

      In fact, blockchain makes this worse because of point 3. In order to forge a diploma now, one has to create a paper copy. With cryptographic signing, they have to copy someone else's. If you make everybody's diplomas public, they can choose from every diploma granted to any person since they can browse them in safety. That means a diploma fraudster can choose a diploma more tailored to the job they want, to their age and appearance, to the fake identity they're trying to inhabit, etc. This is harder than making a paper copy, but with a paper copy you could determine by calling the issuer that it's a fake. With one stolen off the blockchain, there is no difference. That is unless you just list signatures on the blockchain, in which case you haven't benefited anyone but you have generated a pointless set of hashes.

      1. Anonymous Coward
        Anonymous Coward

        Re: Federal Reserve's Ignorance of the Subject is Appalling

        "In fact, blockchain makes this worse because of point 3. In order to forge a diploma now, one has to create a paper copy. With cryptographic signing, they have to copy someone else's."

        What if it can't be copied, due to the diploma being attached to something unique like a non-fungible token (NFT)?

        1. doublelayer Silver badge

          Re: Federal Reserve's Ignorance of the Subject is Appalling

          It can be copied. I can go and make copies of everybody's NFTs. The data and the hashes. It's not useful, because the data was probably already free and the signature doesn't help me, but I could. The only thing I can't do under those circumstances is transfer that unique NFT to somebody else. However, with the diploma example, I'm not transferring my diploma to prove I own it (if that's the new plan, it's a bad plan because lots of people will lose a key or have it stolen and instantly lose their educational history, so you'll find yourself at the center of a protest armed with paper diplomas). In the normal case, the blockchain-attached diploma is only a method of demonstrating that I have it, but anyone who is not me but downloaded the blockchain has it too.

      2. myfacelaunched100ships

        Re: Federal Reserve's Ignorance of the Subject is Appalling

        1. Is this a real diploma? Yes. It is authenticated with the university's public key.

        2. Are the details on this diploma unchanged? Yes. The hash value hasn't changed from the one stored on the blockchain at the time of graduation.

        3. Is the person presenting this diploma the person who was given the original? The diploma is cryptographically linked to the graduate by the issuing university. This is accomplished by both parties signing the document with their private keys and recording the resulting hash on the blockchain. This hash value proves that the owner of the key that signed the document was awarded a diploma by the university.

        1. doublelayer Silver badge

          Re: Federal Reserve's Ignorance of the Subject is Appalling

          "1. Is this a real diploma? Yes. It is authenticated with the university's public key."

          Right, like I said. No blockchain needed.

          "2. Are the details on this diploma unchanged? Yes. The hash value hasn't changed from the one stored on the blockchain at the time of graduation."

          Or because the hash signed by the public key is still valid. No blockchain needed.

          "3. Is the person presenting this diploma the person who was given the original? The diploma is cryptographically linked to the graduate by the issuing university. This is accomplished by both parties signing the document with their private keys and recording the resulting hash on the blockchain. This hash value proves that the owner of the key that signed the document was awarded a diploma by the university."

          Still no blockchain needed if you want to use that approach, because you have the recipient sign, then the university sign. The university's signature covers theirs, so their key can't be changed. Anyone who can present that key can be authenticated by your suggestion. Also, that's a rubbish suggestion. You're making correct key management the only method of proving educational history. Lots of people will have problems with that. Keys will be stolen a lot, keys will be generated which can be broken in twenty years, when a diploma is still useful. Above all, keys will be lost in prodigious amounts. To say nothing of the privacy risks or the ability for thieves to simply pursue their targets to get their keys. That is, if anyone actually does the cryptographic challenge to verify the student still has their key.

          1. myfacelaunched100ships

            Re: Federal Reserve's Ignorance of the Subject is Appalling

            All the work arounds you have proposed are klunky and difficult to implement. For instance someone has to be the certificate authority and maintain a database of degree credentials and key-pairs. Allowing the graduate to maintain the only copy of the degree /transcript with its authenticity determined by a blockchain hash proof in essence makes the blockchain the certificate authority. This model frees the university from maintaining a degree credential database which in some parts of the world could disappear through environmental or political catastrophes. It also allows subsequent degree credentials to be aggregated within the application from other universities.

            BTW it was MIT that thought this up. Check it out. https://news.mit.edu/2017/mit-debuts-secure-digital-diploma-using-bitcoin-blockchain-technology-1017

  11. Anonymous Coward
    Anonymous Coward

    For those with cash, reality is just dandy

    For those without cash, there’s always crypto

    Choose your own adventure!

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