Bitcoin’s ‘moral imperative’ to replace fiat currencies
Bitcoin can fulfil a dual role as both a store of value and money to buy goods and services, and must replace “debased” fiat currencies in emerging nations helmed by corrupt governments, The Australian Financial Review’s Crypto Summit heard.
The world’s largest cryptocurrency has raced to a $US524 billion ($828 billion) market value, and a single coin was worth $US27,220 on Monday, just 14 years after its original inception in 2009. Valuation peaked at more than $US65,000 a coin in November 2021.
Brian Armstrong the billoinaire founder of Coinbase said bitcoin will be adopted as money in the future. Peter Rae
Brian Armstrong, the billionaire 40-year-old founder of leading US crypto exchange Coinbase, said bitcoin should be owned as a hedge against price inflation, which reached 8.4 per cent in the December quarter of 2022 in Australia before slowing to 6 per cent year-on-year in the June quarter of 2023.
Mr Armstrong added one reason bitcoin was not being adopted more quickly as money for everyday transactions was because holders were reluctant to spend it given they believed its value would appreciate in the future.
“Bitcoin’s a type of currency that is deflationary,” Mr Armstrong said.
“If it’s inflationary, you have more incentive to spend it. If it’s deflationary you have more incentive to save it because in the future you may end up converting [your bitcoin] to fiat currencies when you need to spend.”
Another crypto evangelist, Daniel Roberts, the co-founder of US-based and Nasdaq-listed bitcoin miner Iris Energy, said investors were kidding themselves if they believed cash was a safe or risk-free investment to hold.
Daniel Roberts, co-founder and co-chief executive of Iris Energy. Michael Quelch
“Fiat currencies are programmed to be debased,” he told the summit.
“Governments must keep printing now [due to fiscal imbalances and debt], if you’ve got an 8 or 9 per cent return on your capital [as a sharemarket or property investor] all you’ve done is preserve your wealth.”
Mr Armstrong warned that emerging market currencies in Africa, the Asia Pacific and South America faced “long tails” of destruction due to reckless and corrupt governments.
“Bitcoin has an important role in feeding the moral imperative to replace the long tail of fiat currencies that are really abused the most in [emerging market] countries around the world,” he said.
“A lot of those currencies eroded the wealth of the poorest people in society. And it’s a real tragic story where governments have abused that and it’s basically like theft.”
Since its initial public offer at the peak of the cryptocurrency bubble in November 2021, Coinbase – as the largest crypto exchange in the US – has ridden a regulatory storm and crypto price rollercoaster, which saw it reach a valuation of more than $US100 billion at $US429.54 per share at the time of its float.
The stock has tumbled to $US73.43 per share since its float as the US Federal Reserve took interest rates on cash from 0.25 per cent in March 2022 to an upper bound of 5.5 per cent in July 2023.
Mr Armstrong said the revised policy settings in the US, among other strengths, meant he did not believe the US dollar was in danger of being displaced from its status as the world’s reserve currency. However, bitcoin was acting as a “ballast against deficit spending” by the US government.
In the US Mr Armstrong faces an ongoing legal battle after the Securities and Exchange Commission alleged Coinbase violated securities laws by operating as an unregistered broker and clearing agency for cryptocurrencies.
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