In an interview with Bloomberg, Joseph Stiglitz said bitcoin should be made illegal because it does not have a “socially useful function” and warned that it’s only a matter of time before the government realizes this and shuts the popular digital currency down.
“Bitcoin is successful only because of its potential for circumvention, lack of oversight,” the economist said during the interview, in reference to the fact that the virtual currency’s distribution is decentralized and not governed by a central bank. “It’s a bubble that’s going to give a lot of people a lot of exciting times as it rides up and then goes down.” (See also: 5 Ways to Short Bitcoin.)
He added: “The value of a bitcoin today is expectations of what the bitcoin is going to be tomorrow. So it seems to me it ought to be outlawed. It doesn’t serve any socially useful function."
Stiglitz, who chaired the U.S. President's Council of Economic Advisers during the Clinton Administration and served as chief economist at the World Bank, warned that once the government comes to a similar conclusion it can easily shut down bitcoin at any time. "If the government says 'the reason bitcoin is being used is circumvention, they could close it down at any moment," he said. "And then it collapses."
During the interview, Stiglitz confirmed that he isn’t against innovative new methods of payments and is fully behind moving away from a cash society. However, while he’s all for creating a digital economy, he believes that the money must be controlled by the government.
Stiglitz’s comments came on a volatile day for bitcoin. The digital currency dropped from a record value of more than $11,000 to just under $9,300 in 24 hours of trading before recovering some of its losses.
The virtual currency’s strong rally — it has risen in value tenfold this year — has led numerous commentators to question whether bitcoin is a bubble capable of bursting at any time. One of its most outspoken critics is JPMorgan Chase CEO Jamie Dimon.
Dimon has described bitcoin as a “fraud” and even threatened to fire JPMorgan traders that buy or sell the digital currency. However, recent reports indicate that the Wall Street bank is now exploring whether to let its clients trade bitcoin futures. (See also: JPMorgan May Not Rule Out Bitcoin After All.)