Cryptocurrencies are the “mother of all scams,” and blockchain is “the most overhyped — and least useful — technology in human history: In practice it is nothing better than a glorified spreadsheet or database,” Nouriel Roubini, professor of economics at New York University’s Stern School of Business, told senators on Thursday.
Roubini, who famously predicted the 2008 credit and housing bust, testified before the Senate Banking Committee during a hearing on the cryptocurrency and blockchain ecosystem, that the “crypto bloodbath is in full view” and that “the new refuge of the crypto scoundrels is ‘blockchain.’”
He proclaimed that the “entire cryptocurrency land has now gone into a crypto-apocalypse as the mother and father of all bubbles has now gone bust.”
Since the peak of this bubble late last year, Roubini said, Bitcoin “has fallen by about 70% in value (depending on the week). And that is generous.”
Other “leading cryptocurrencies such as Ether, EOS, Litecoin, XRP have fallen by over 80% (or more depending on the week).”
“Thousands of other cryptocurrencies — literally scam-coins and scam-tokens — have fallen in value between 90% and 99%,” he continued.
Noting the 800-point market drop on Wednesday, Roubini said, “major cryptocurrencies plunged another 10% in a day.”
He cited a recent study showing that 81% of all initial coin offerings “were scams in the first place, 11% of them are dead or failing while only 8% of them are traded in exchanges. And out of this 8% the top 10 coins traded — after Bitcoin — have lost between 83% and 95% of their value since peak with an average loss of over 90%.”
Crypto, Roubini asserted, “is not money, not scalable. To be a currency, Bitcoin — or any cryptocurrencies — should be a serviceable unit of account, means of payments, and a stable store of value. It is none of those things.”
Hundreds of other cryptocurrencies “are invented every day, alongside scams known as ‘initial coin offerings,’ which are mostly designed to skirt securities laws,” Roubini continued.
Nobody, he said, “uses Bitcoins for transactions apart from criminals and terrorists.”
Cryptocurrencies, he said, “are creating crypto money supply and debasing it at a much faster pace than any major central bank ever has. No wonder that the average cryptocurrency has lost 95% of its value in a matter of a year.”
Real Revolution in Financial Services Is Fintech
There is a revolution in financial services, Roubini said, and it has nothing to do with blockchain or cryptos: “It is called fintech, and is based on a combination of AI, big data and internet of things.”
Fintech is “already being used daily by billions of people for billions of financial transactions. There is no blockchain in fintech.”
(Not everyone in finance would agree. In 2019, the CFA institute is adding blockchain and cryptocurrencies to a new fintech reading in its curriculum, and they will be covered on the CFA exam.)
Also on Thursday, the Securities and Exchange Commission announced that it obtained an emergency court order halting a planned ICO which the backers falsely claimed was approved by the SEC.
The order also halts ongoing pre-ICO sales by the company, Blockvest LLC and its founder, Reginald Buddy Ringgold, III.
An SEC complaint unsealed yesterday alleges that Blockvest falsely claimed its ICO and its affiliates received regulatory approval from various agencies, including the SEC.
The SEC and Commodity Futures Trading Commission released an Investor Alert the same day warning investors to watch out for false claims about agency actions and endorsements related to digital assets.
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