Former Treasury Secretary Larry Summers (D) called Bitcoin digital gold at a virtual meeting on International Economics when asked if he sees Bitcoin and digital currencies as a big challenge to the US dollar system. Summer said last week,
“I think that Bitcoin, and perhaps crypto more generally, is emerging as a kind of digital gold.” “There’s a kind of social convention around ultimate risk protection assets. I think there’s a good chance that they are going to occupy that niche. They are an inherently finite supply, and more and more people are deciding that they occupy that niche. So my best guess is that they are here to stay.”
This is not the first time Summers has shared positive views on Bitcoin; he said earlier this year that it is here to stay. This time, he talked about how there has been a revolution happening in the payments. The way payments happen has changed fundamentally, and “it’s likely to change fundamentally again,” he said. However, Summers, who was former President Obama’s top economic adviser, believes it is an “extremely remote risk” that the Federal Reserve will lose the ability to regulate the US economy by setting interest in the way Argentina did.
“It’s not something that’s going to happen anytime very soon.”
But he said the US does need to be attentive to the geopolitical side of the foreign policy house so that its ability to pursue sanctions will not be diminished when the dollar loses some monopoly as a means of international payments.
“On international grounds and on maximum efficiency and payments grounds, I think that my instincts would be to be a bit more aggressive about thinking about central bank digital currencies than I think the Fed is.”
While he is worried about the Fed’s laggard strategy on CBDC relative to other central banks, he is not yet concerned about it being a fundamental threat to our ability to do monetary policy either.