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’
Bitcoin will be increasingly important as means of payment and an alternative asset, there is no doubt about that, but it is unlikely to displace the US dollar as the world’s reserve currency. For Bitcoin to be considered fiat, a legal tender, it should, as a minimum, be useful as a medium of exchange (i.e. a means of payment), 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 increasingly used as medium of exchange, it is highly debateable whether it will ever function strongly enough as a store of value and unit of account given its highly volatile nature. Furthermore, Bitcoin also faces stiff competition from central banks and 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 is possible the comments of Peter Thiel may have not garnered the attention they undoubtedly will if they had come any other source, yet some of his claims, although tendentious are certainty food for thought, and may, in a perverse way, be somewhat positive if they incite further discussion around cryptocurrencies amongst regulators.