By An interview Elizabeth Warren did last year with NBC News is doing the rounds on social media as bitcoin advocates mock her for saying art is more valuable than bitcoin because “I can throw darts at it.”
Warren is back in the news as her war on Bitcoin continues. With new legislation in the pipeline that would put huge regulatory burdens on anyone involved with bitcoin business, Warren is once again the target of discontent from Bitcoin advocates.
An interview she did with NBC News a year ago has resurfaced and is doing the rounds on social media as it highlights her apparent misunderstanding of what Bitcoin is and where its value comes from.
Warren blasts Bitcoin as speculation
Speaking to NBC News in April 2022, Democrat Senator Elizabeth Warren made the case that buying bitcoin is no different to “buying air.” She made the case that it’s purely speculative. People buy bitcoin because they hope the price will go up so they can sell it later on for a profit.
“There’s no thing that backs it up… it’s just belief.”
In Senator Warren’s mind, bitcoin must have no actual value because it isn’t backed by a government or physical commodity.
She likens bitcoin to the 2008 housing crisis, where a credit bubble led to a collapse in the world financial system. As far as Warren is concerned, bitcoin is a speculative bubble supported only by confidence.
Her opposition to the digital hard money is, supposedly, to protect consumers from the danger of that bubble bursting.
Government is as good as gold
It’s also clear from her statements that she believes a government promise to be as good a backing as a physical commodity. A “government promise” is a “thing of value”, as far as she’s concerned.
So whilst U.S. dollars aren’t backed by any physical commodity, such as gold, they are still inherently valuable because the U.S. government backs them.
What she actually means by “backing” is unclear. If everyone decides not to use U.S. dollars anymore, no amount of “government promise” is going to change the fact that those dollars won’t be worth the paper they’re printed on.
She states that bitcoin is only backed by the confidence of its buyers, but appears to believe that the power of the state is enough to provide value to the dollar. However, if confidence in the government itself fails, where then does the dollar stand?
Clearly, the dollar is also only supported by confidence, except it’s even worse for the dollar than for bitcoin. With bitcoin, the confidence is based on math, the verifiable issuance rate, the hashpower turning energy into digital scarcity, and in the network itself.
Confidence in the dollar exists by proxy through the U.S. government.
As the dollar’s value decreases due to inflation, people will spend it as quickly as possible but won’t want to save it. Bitcoin, on the other hand, is mostly hoarded rather than spent. This is Gresham’s Law, that bad money drives out good money because people want to spend money that has less long-term value and hoard money that has more.
Thiers’ Law works in reverse. Good money will drive out bad money because noone wants to accept the bad money anymore. This happens when a currency becomes nearly worthless due to hyperinflation. If this happens with the dollar, people will simply stop using dollars.
In that eventuality, bitcoin might replace the dollar since it has long-term value that doesn’t decrease due to inflation.
Warren believes Bitcoin doesn’t solve problems, proposes CBDCs instead
Warren acknowledges that commercial banks have failed customers over the years. Considering her position as a progressive Senator in favour of more and more financial regulation, this isn’t surprising.
Her anti-bitcoin stance makes her proposed solution even less surprising: Central bank digital currencies.
Warren states that the only “problem” bitcoin can solve is the issue of sending money internationally in a fast, frictionless way.
She proposes CBDCs as an alternative since they fulfil her gold standard (almost literally) of being “government-backed”.
To Warren, there are no benefits to a payment system that is decentralized, peer-to-peer, immutable, transparent, and with its own globally liquid currency. Remember, Warren believes that bitcoin is a Ponzi scheme. It’s only valuable because people keep buying it.
If we ignore its use cases as a hedge against inflation in Venezuela, streamlining supply chain costs in Nigeria, or facilitating renewable energy build-out in Texas, Warren’s argument is almost believable.
CBDCs are certainly gaining traction worldwide at the bureaucratic level. 100 countries are currently at some stage of researching and developing them. However, they are not being widely adopted, with only a few examples across the globe.
Opposition to the concept of a digital currency controlled completely by the central government is fierce, and private digital currencies, such as bitcoin, are far ahead in terms of adoption and public acceptance.
As Warren herself admits, people don’t want the government to have such control over their money. CBDCs are a massive threat to personal autonomy and privacy. Warren, however, invokes the argument that if you have nothing to hide, you have nothing to fear.
What’s backing bitcoin?
Despite Senator Warren’s assertion that buying bitcoin is less useful than buying a painting (“I can throw darts at [a painting]”), bitcoin is backed by just that: its usefulness.
Pyramid schemes come and go, they don’t last 14 years and counting. If all bitcoin had to back it up was belief from a few gullible people, it would have collapsed by now.
As a store of value, Bitcoin rivals gold (and wins). As a remittances payments system, it’s more accessible than any other currency on the planet with superior network effects compared to proprietary remittance services. It’s freer than any other payments network, existing outside the control of a corrupt or inefficient centralized authority.
By removing third parties, bitcoin is cheaper and more efficient than traditional finance. By maintaining pseudonymity, bitcoin retains the privacy of physical cash whilst enjoying the “fast and frictionless” perks of digitized currency. By being accessible to anyone with an internet connection, bitcoin provides financial services to those left out of the traditional, centralized banking system.
Bitcoin has value because it’s useful. That’s what backs bitcoin.
If it stops being useful, people will stop using it, people will stop buying it, and its price will crash to zero. Or near zero to be precise, since hascash inventor Adam Back still has a running buy order for 21M Bitcoin at $0.02.
I don’t see that happening. Clearly, Elizabeth Warren agrees. If Bitcoin becomes nearly worthless and nobody uses it, what reason could she have to want to regulate it? Of course, if Bitcoin is very useful, and therefore becomes very valuable, then having control over it would put regulators in a very powerful position.
Does Elizabeth Warren want to regulate something she thinks is useless, or does she want power over something she thinks people are going to start adopting as the dollar drops?
