Why bitcoin will not take over the world

Yes it is here to stay, and it is not a bubble, but…here is one part of the argument:

If you hold or trade with a stablecoin, you incur several risks. First, the stablecoin peg to the dollar may someday be broken, an old problem with pegged exchange rates that Milton Friedman often warned about. Second, to the extent stablecoins and other crypto assets become a major part of the financial system, they will attract more regulatory interest. That in turn will limit many of their advantages over the traditional bank sector. The U.S. government does not want a financial system that evolves outside the purview of the Federal Reserve, FDIC and other regulatory institutions.

Third, the formal banking sector will improve, for instance by moving to more rapid clearing, or by introducing electronic reserve currencies. With the latter, you could transfer your electronically-based dollars within the accounting system of the central bank, and achieve a non-intermediated transfer without resorting to crypto. It is not obvious that crypto will be the market winner once more mainstream institutions learn some lessons from the success of crypto.

And in sum:

The more utopian scenarios for crypto, whether proponents realize it or not, rely on the notion that crypto remains simultaneously fringe and mainstream. That will be a hard trick to pull off.

Your rebuttals, and more, are considered at the link to my latest Bloomberg column.

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