[The Editors' Verdict] Is Bitcoin Like Gold?

On the 14th (local time), Jerome Powell, Chairman of the U.S. Federal Reserve Board (Fed), stated at an event hosted by the New York Economic Club that "cryptocurrency is like gold." He had made a similar remark at another event hosted by the Bank for International Settlements (BIS) in March. Comparing cryptocurrency to gold not once but twice suggests that his conviction is firm.

It is somewhat difficult to understand at first glance that cryptocurrency, which has been warned about for speculative risks, is compared to gold, considered the safest asset. His remarks did not mean that cryptocurrency is a safe asset or can replace currency. Chairman Powell bluntly said, "They (cryptocurrencies) are a medium of speculation." He added, "Cryptocurrencies are not used as a practical means of payment," and "For thousands of years, humans have attributed special value to gold that it does not inherently possess." Gold is actually just a metal used for industrial purposes, but humans have assigned value to it. Powell's statement was merely to suggest that this characteristic of gold resembles that of cryptocurrency.

The irony is that cryptocurrency supporters also compare cryptocurrency to gold. They believe that cryptocurrency might one day replace gold. However, unlike cryptocurrency, which has a very short history, gold has been used for thousands of years as a store of value and a medium of exchange, marking a fundamental difference. In the 19th century, the introduction of the gold standard in the West, linking government-issued currency to gold, gave gold even greater power. Although the gold standard was abolished in 1971, gold is still recognized as a stable investment vehicle.

Unlike gold, governments and central banks around the world are continuously warning about the risks of cryptocurrency. Paper money or coins not recognized by governments or banks are nothing more than mere pieces of paper or metal.

In this context, the recent decision by the Turkish government to ban cryptocurrency trading offers several implications for us. As political instability increased in Turkey recently, investors flocked to Bitcoin, which led to a sharp decline in the value of the Turkish lira. When concerns arose that the massive conversion of assets into Bitcoin by investors would further accelerate the lira's decline, the Turkish government took ultra-strong measures such as shutting down Bitcoin exchanges and detaining their executives.

The Turkish case shows that when cryptocurrency shakes the existing financial market, central governments or central banks can impose sanctions at any time. Ray Dalio, founder of Bridgewater Associates, also said, "It is not an impossible scenario for the U.S. government to implement a Bitcoin ban if it considers it a threat to its financial system." If the U.S. government judges that the dollar hegemony could be shaken, it will not hesitate to take strong measures. The foundation for the U.S. to maintain its superpower status as it does now stems from the strong power of the dollar.

In South Korea, the 2030 generation is flocking to Bitcoin, leading to social instability. However, since there is no clear legal basis related to cryptocurrency, there are few proper ways to regulate it. Meanwhile, issues such as cryptocurrency fraud and illegal money transfers aimed at domestic and international price differences are also being raised. Overseas, there are moves toward institutionalization, such as the direct listing of the cryptocurrency exchange Coinbase and preparations for launching cryptocurrency ETFs.

The current issue is not whether to recognize cryptocurrency as currency or not. Cryptocurrency investment has grown large enough to affect not only individual investors but also national financial systems. The government can no longer afford to ignore it.

This content was produced with the assistance of AI translation services.