All eyes are currently on bitcoin in the cryptocurrency space. The coin almost hit the $20,000 mark this month, before plummeting down significantly. The recent one-third slump in price did not go unnoticed.
Sheila Bair, former Federal Deposit Insurance Corporation (FDIC) chair, expressed her opinions on Yahoo! Finance. Although her ideas were similar to those of other financial regulators, her take on cryptocurrency itself is quite interesting.
As far as bitcoin’s volatility is concerned, she believes that it is a bubble. “Anything up by 2,000% in less than a year is a bubble,” she asserted. She said that while such an asset definitely requires regulation, governments need not to issue a complete ban on it. Blair also supported the SEC’s and CFTC’s efforts to reduce crypto-related frauds.
The coin’s unpredictability is a matter of concern for financial regulators. Their job is to protect uninformed investors against major losses. In Bair’s opinion, banning token sales, or crypto-trade, is not the best way to protect investors. Governments, instead, should address the matter from a different approach.
Given its popularity, investors cannot be banned from participating in the crypto-market. They can, however, be given proper education about the industry’s operations. This would enable them to make informed decisions which can save them from a grave loss.
Bitcoin should not be banned
Bair believes it is more beneficial to help bitcoin be further accepted into the mainstream economy, rather than to ban it. Although unregulated and controversial, the coin is attracting investments from noteworthy parties all over the world. However, there are doubts regarding bitcoin’s ability to become a replacement to fiat currency, owing to its high volatility rate.
Bair further acknowledged that the modern world is more about technology and less about governments. In this light, bitcoin’s lack of regulation might actually be a benefit of the coin. The digital currency is not backed by any central bank, rather it is supported by a distributed ledger technology, known as blockchain.
While Blair recognizes the potential benefit of blockchain technology, she feels that we are years away from a widespread application of the technology in various industries. Businesses are seeing major progress, at the moment, by merely joining the technology’s name to theirs.
At the end, Bair made sure to warn against blind investing. “As with any asset, don’t invest more than you can afford to lose. And do your homework before you do so,” she advised.