Crypto is often referred to as a solution to protect against runaway inflation. Nevertheless, according to experts, their adoption can have a negative effect.
Crypto: a tool against inflation?
Since the beginning of inflation, cryptocurrencies have often been seen as an alternative economy capable of protecting its investors from inflation. But in reality, Bitcoin would not be as good protection as advertised. During a conference held at the Paris Blockchain Summit on July 8 in Palmeraie, five experts discussed the need to take crypto with a grain of salt.
Remy Andre Ozcan, President of the French Federation of Blockchain Professionals, Dr Idriss Aberkane, Joseph Collement, General Counsel at Bitcoin.com, Yves Choueifaty, CEO of Tobam and Pierre Krajewski of the Rousseau Institute met to discuss’ inflation. According to them, the benefits of Bitcoin are indisputable. The first cryptocurrency can actually be used to evaluate and pay for goods or services. It is therefore possible to use it as a traditional currency.
At first glance, digital currencies seem a good alternative to inflation for two reasons:
- Investing in BTC makes it possible to diversify a portfolio and therefore generates less volatility
- Crypto is not based on the traditional financial model. It should therefore resist inflation
For Dr Idriss Aberkane and Joseph Collement, cryptocurrencies are a good alternative to fiat money, especially as they enjoy some popularity among younger generations. However, it is clear that there is a growing rapprochement between Bitcoin and finance. This is also the one that rushed the industry into the crypto winter. The second proposal may therefore become invalid in the long run.
Crypto could become a manipulative tool for traditional financing
The use of Bitcoin can nevertheless have some disadvantages, which are not insignificant. Embracing digital currencies to fight inflation could be a trap that would backfire on enthusiasts. Once approved by governments, they can become a real object of manipulation. CBDCs controlled by banks are particularly affected.
With CBDCs, the government has full control over people’s assets. There is therefore a risk that individual freedoms will disappear. We have already seen it in China, where the government blocked some bank accounts after opposition protests. Enemies of the government who own CBDCs, which means anyone, could therefore have their funds confiscated very quickly, anywhere in the world and for any reason.
Excerpt from Yves Choueifaty’s speech at the Blockchain Week conference in Paris
According to Yves Choueifaty, the problem would remain with the adoption of Bitcoin, which governments could also easily censor or manipulate. Easily generated digital currencies can be used for bad causes. Thanks to their abundance, they can also cause a new type of inflation. For Pierre Krajewski, the resistance of cryptocurrencies to inflation would also depend on the goodwill of central banks, which have the power to complicate their use or even cause them to fall.
Despite the approximation of Bitcoins and finances, Joseph Collement recalls that cryptocurrencies are still far from dominating the world. In fact, blockchain technology is not yet strong enough to replace traditional currencies.
Blockchain is still too young to support the needs of all of humanity. In addition, cash is still limited! Now we know how important these are. With the capacity we have, transactions would be limited to 50 per. person pr. day.
Excerpts from Joseph Collements speech at the Paris Blockchain Week conference
In the end, is crypto suitable for fighting inflation? That may well be the case, but many years of work must still be expected to make digital currencies and technology more efficient, more secure and able to meet its opponents.
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