Summers, Former US Treasury Secretary, Says "Cryptocurrency Can Become Digital Gold"

Former U.S. Treasury Secretary Larry Summers [Photo by Yonhap News]

[Asia Economy Reporter Byunghee Park] Former U.S. Treasury Secretary Larry Summers appeared on Bloomberg TV on the 22nd (local time) and said that cryptocurrencies could become digital gold.

Summers explained that cryptocurrencies are unlikely to be used as a major payment method, so their economic value may be limited, but they could serve as an alternative to gold. He evaluated the potential of cryptocurrencies as a store of value, one of the three main functions of money.

Recently, the value of cryptocurrencies has plummeted. According to CoinDesk, the largest cryptocurrency exchange in the U.S., the price of Bitcoin, the representative cryptocurrency, exceeded $60,000 last month but has now fallen to around $34,000.

Summers predicted that cryptocurrencies will continue to survive. He said, "Cryptocurrencies will remain and exist in the form of digital gold." He also said, "Regardless of what happens daily in each country, cryptocurrencies can serve as an alternative to gold for those who want to protect their assets."

Summers said that if the asset value of cryptocurrencies had been about one-third that of gold, cryptocurrencies would have been valued much higher than now and would have had a much higher chance of becoming part of the system.

The global value of gold is estimated to be around $10 trillion. The market capitalization of Bitcoin has recently shrunk to about $700 billion due to a significant price drop.

Yasan Elmandra, an analyst at ARK Investment Management, also compared the values of gold and Bitcoin. Analyst Elmandra said earlier this month that there is no doubt that Bitcoin’s market value will approach that of the gold market within five years.

Summers’ view that cryptocurrencies could be an alternative to gold is similar to that of Paul Krugman, a Nobel laureate in economics in 2008 and a professor at the City University of New York. Professor Krugman also said that while he cannot be confident in the value or stable purchasing power of cryptocurrencies as a medium of exchange, they can continue to exist as an alternative to gold. Although Krugman identifies himself as a cryptocurrency skeptic, he does not think cryptocurrencies will collapse soon and stated that they can serve as a store of value like gold.

Meanwhile, Summers said that the Biden administration’s demand for higher tax burdens on corporations is the right direction. He also warned of the risk of overheating in the U.S. economy and argued that the central bank, the Federal Reserve (Fed), should recognize the risk of inflation.

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