This is exactly the kind of question that will likely trigger a Twitter meltdown from the geeky crypto know-it-alls who are touting crypto as the future just because they want their portfolios to skyrocket overnight.
European Central Bank President Christine Lagarde, the type of personality that would fit the profile of an arch-nemesis of crypto because central banks are what’s wrong with the financial system (at least, according to crypto Twitter), has said that crypto is “worth nothing” according to her “very humble assessment”.
“It is based on nothing,” the former head of the International Monetary Fund said in an interview with Dutch talk show College Tour that aired Sunday.
“There is no underlying asset to act as an anchor of safety…I’m concerned about those people who think it’s going to be a reward, who have no understanding of the risks, who will lose it all, and who will be terribly disappointed, which is why I believe that should be regulated”, she added.
Read more: “Trust No One: The Hunt for the Crypto King” Reminds Us of the True Value of Any Financial Asset
According to my very humble assessment, Lagarde’s statement comes at a time where regulators are probably going to use the Terra debacle as an excuse to overreact, which means that it’ll only be more likely for them to flaunt their supremacy from their ivory towers and say things just to piss off the contrarian crypto community. Not that I’m complaining.
But while Lagarde’s statements are not entirely without merit, let’s not forget that fiat also lacks intrinsic value because it isn’t backed by physical commodities like gold. Instead, its worth is derived from its status as legal tender set by central banks, which does provide them with some semblance of “stability”.
Fiat can be used as a medium of exchange, a store of value, or as a unit account, but it also means that this centralised system only works because we perceive and trust in that value. It takes 16 cents to create a US$100 bill, with the remaining $99.84 coming from the trust people place in it.
Which is why to say that cryptocurrencies are completely worthless is a bit exaggerated. Yes, they too have no intrinsic value, and are almost entirely based on perceived value (you’re essentially placing your trust in strings of computer code), but their utility (and in some cases, their scarcity) on blockchains means that they can actually be used for something – DeFi, NFTs, as a store of value. Whether or not you thing that they’re actually “something” isn’t really the argument here.
Christine Lagarde is Christine Lagarde, i.e. she knows a lot more about money and life than I do. But despite my recent shithousery against the crypto, I’ll have to disagree with her on this one.