Minneapolis Federal Reserve president Neel Kashkari participates in the Yahoo Finance All Markets Summit at Union West on Thursday, Oct. 10, 2019, in New York. (Photo by Evan Agostini/Invision/AP)
Federal Reserve official Neel Kashkari, who reassured the public early in the pandemic that there is no end to the Fed’s ability to inject “an infinite amount of cash” into the economy, came out hard against the crypto market and said he sees no use case for bitcoin.
“I was more optimistic about crypto and bitcoin five or six years ago,” Kashkari said Tuesday at the Pacific Northwest Economic Regional Annual Summit in Big Sky, Montana. “So far what I’ve seen is … 95 percent fraud, hype, noise and confusion.”
President of the Federal Reserve Bank of Minneapolis, Kashari was the interim assistant secretary of the Treasury for Financial Stability from 2008 to 2009. He lost a bid to be elected as a Republican governor in California in 2014 and oversaw the Troubled Asset Relief (TARP) Program — a major component of the U.S. government response to the 2007-2008 financial crisis.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Anyone can create a digital asset, Neel suggested as part of his criticism of the crypto market. “There is no barrier to you creating your own bitcoin, or me creating my own … I’ll call it Neelcoin,” he said.
Kashkari did not mention the power of network effects which make bitcoin more secure and valuable in the market’s eyes than its many competitors, Marc Hochstein wrote for Yahoo Finance. A network effect is what happens when a product becomes more valuable as more people use it, according to crypto exchange Binance.
“There are thousands of these garbage coins that have been created,” Kashkari said. “Some of them are complete fraud Ponzi schemes. They dupe people into investing money and then the founders rip them off.”
Kashkari stopped short of saying crypto would never be useful — “it’s certainly possible”, he said — but he’s skeptical.
“I’ve not seen any use case other than funding illicit activities like drugs and prostitution,” Kashkari said, ignoring the growing mainstream acceptance of bitcoin for payments or its usefulness to marginalized people around the world who have been historically denied access to traditional banking.
“I have not seen any use case that is legitimate so far that bitcoin solves,” Kashkari said.
Kashkari was mocked for his comments on Twitter and some users compared him to others who famously disavowed new technology.
“Paul Krugman 1998: I don’t see any real world use for the Internet” John Tuldtweeted @BradHuston.
“And I don’t see any legitimate use of Kaskhari!” @FreeMarkets_now tweeted.
“It must really grate on him that when he speaks the crowd doesn’t fawn over his greatness, but instead always ask him about crypto” @aviatoreight tweeted.
Not everyone disagreed completely with Kashkari’s vision problem when it comes to seeing a bitcoin use case. “I do not either since it is expensive” AcornHoarder @ZombiLiving tweeted. “however, is better then fiat. It is faster then Fiat, Cheaper then Fiat, And more useful then Fiat given token creation and smart contracts and even allowing for DEX with reduced costs compared to the best brokers @federalreserve…”
Yahoo Finance reader Brandon commented, “the chairman of the federal reserve opposes a modern, updated currency that trumps his in so many ways? couldnt have seen this coming”.
And on Marketwatch reader comments, Iam Smart wrote, “with all the tangible measures of wealth, why would anyone NEED to put any significant portion of their wealth into something that has value only because of the willingness of other buyers? And who is to say they will be there when you want to cash out?”
READ MORE: Federal Reserve Member Neel Kashkari: Systemic Racism Hurts The Economy, Time To Deal With Underlying Racism In U.S.
