Crypto Is Useless, Says Fed President

What to Know:

• Federal Reserve President Neel Kashkari reiterated his skepticism towards cryptocurrencies, labeling them “useless.”
• Kashkari voiced concerns about the potential impact of stablecoins on traditional banking and lending practices.
• He challenged crypto advocates to provide concrete use cases, particularly within developed economies like the United States.

The ongoing debate around the utility and viability of cryptocurrencies continues as Federal Reserve Bank of Minneapolis President Neel Kashkari recently stated his long held view that crypto is “useless”. His comments, delivered during a panel discussion, underscore the deep-seated skepticism that persists within some regulatory circles. This perspective is especially relevant for institutional investors navigating the complexities of incorporating digital assets into their portfolios, particularly as regulatory clarity remains a key hurdle.

Stablecoins and Lending Concerns

Kashkari’s primary concern revolves around the potential impact of stablecoins on the traditional financial system. He suggests that the widespread adoption of stablecoins could disintermediate banks, leading to a reduction in lending activity. This argument touches on a critical aspect of financial stability, as lending is the lifeblood of economic growth. The concern is that if a significant portion of funds migrate to stablecoins, banks may face liquidity challenges and curtail lending, potentially impacting the broader economy. This is a common concern echoed by central bankers globally.

Cross-Border Payments and Practicality

A common argument for crypto’s utility lies in its potential to facilitate cheaper and faster cross-border payments. Kashkari challenges this notion by highlighting the practical hurdles of converting digital assets back into fiat currency in the recipient country. He points out that unless merchants directly accept crypto, the friction of conversion remains a significant impediment. This raises a key question for institutional investors: are the purported benefits of crypto-based cross-border payments truly outweighing the existing infrastructure and associated costs?

The Demand for Concrete Answers

Kashkari urges regulators, policymakers, and the public to demand clear and practical explanations from crypto proponents, rather than accepting technical jargon. He argues that when pressed on real-world applications, the utility of crypto often falls short. This call for transparency is particularly relevant for institutional investors who require a robust understanding of the underlying technology and its potential risks before allocating capital.

Historical Skepticism and Market Context

Kashkari’s skepticism towards crypto is not new. He has been a vocal critic of the industry for years, even labeling the cryptocurrency market a “farce” in 2018. His consistent stance reflects a broader concern within some regulatory circles about the lack of intrinsic value and the potential for speculative bubbles in the crypto market. This historical perspective serves as a reminder of the inherent volatility and regulatory uncertainty that continue to characterize the digital asset space.

Implications for Institutional Adoption

Kashkari’s remarks serve as a reminder that regulatory scrutiny and skepticism remain significant headwinds for the widespread adoption of cryptocurrencies by institutional investors. While some institutions have begun to explore digital assets, many remain on the sidelines, awaiting greater regulatory clarity and a more compelling value proposition. The ongoing debate about crypto’s utility and its potential impact on the traditional financial system will likely continue to shape the regulatory landscape and influence institutional investment decisions.

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Source: Original article