Bitcoin ‘mother of all scams,’ says ‘Dr. Doom’

Calls blockchain technology ‘overhyped’

SAN FRANCISCO • The economist who predicted the 2008 financial crash has warned American politicians that Bitcoin is “the mother of all scams.”

Nouriel Roubini, a fierce critic of virtual currency known as ‘Dr. Doom’ for his bearish stances, took aim at the blockchain technology underpinning cryptocurrency.

It is often hailed as transformative, even by those cynical about digital coins.

“Blockchain is the most over-hyped technology ever,” the New York University professor told the U.S. Senate banking committee.

“No asset class in human history has ever experienced such a rapid boom and total utter bust and implosion. … It is nothing better than a glorified spreadsheet or database.

“It is clear by now that Bitcoin and other cryptocurrencies represent the mother of all bubbles,” he added.

He made all the familiar arguments about cryptocurrencies: That they have no intrinsic value; that they impose transaction costs that are too high for small payments, making them useless as currencies; and that they use up too much energy to generate.

He warned that Bitcoin, the most popular cryptocurrency, was deflationary in nature because of its finite supply (in a growing economy, that means prices denominated in Bitcoin cannot but fall) and that most of the other virtual currencies “have an arbitrary supply-generation mechanism that is worse than any fiat currency.”

Roubini pointed to research showing that almost four-fifths of all initial coin offerings have been outright scams.

He argued that the crypto economy was concentrated in dodgy jurisdictions such as China and Russia, and that it created a wealth inequality “greater than that of Kim Jong-un land.”

Roubini said the nickname “s---coins,” used by cryptocurrency traders referring to less valuable coins, was “a grave insult to manure.”

The attack contradicts proponents of blockchain, including the British government’s science office.

It came as the cryptocurrency market took a battering off the back of tumbling global stock markets. Bitcoin dropped as much as 6.9 per cent to US$6,080, its lowest point in two months. At its peak late last year Bitcoin was worth $20,000.