Billionaire tech investor Peter Thiel courted controversy recently by highlighting Bitcoin’s potential in undermining the US dollar’s position as a global reserve currency. Thiel shared his opinion in an online seminar about Big Tech and China held by the Richard Nixon Foundation on Tuesday 6 April, 2021. Here, KBS’s Dr Timothy King, an expert in cryptocurrency, gives his opinion on Thiel’s thought-provoking claims..
‘Bitcoin will be increasingly important’
Bitcoinwillbe increasingly importantasmeans of payment and an alternative asset, there is no doubt about that,but it is unlikely to displace theUS dollaras the world’s reserve currency.For Bitcoin to be considered fiat, a legal tender, itshould, asa minimum,be usefulas amedium of exchange(i.e.a means ofpayment), store of value (i.e.the value of Bitcoin should hold its value over time and not perish or depreciate) and unit of account.
Although Bitcoin is increasinglyused asmedium of exchange,it is highly debateablewhether it will ever function strongly enough as a store of value and unit of account given its highly volatile nature.Furthermore,Bitcoin also facesstiffcompetition from central banksand countries who would be highly reluctant to forgo their dominant positions as issuers of fiat money. Many are already experimenting with digital currencies that utilise blockchain technologies.
It ispossible the comments ofPeterThielmay have not garnered the attention theyundoubtedly will iftheyhad come any othersource, yet some of his claims, althoughtendentiousare certainty food for thought,and may,in a perverse way,be somewhatpositive if they incite further discussion around cryptocurrencies amongst regulators.
Dr Tim Kingis Senior Lecturer inFinance,Bankingand Innovation at Kent Business School andDirector of the Centre for Quantitive Finance.
