The economist who predicted the 2008 financial crash has warned American politicians that Bitcoin is “the mother of all scams” during a Senate hearing on cryptocurrency.
Nouriel Roubini, a fierce critic of virtual currency, took aim at the blockchain technology underpinning cryptocurrency, which is often hailed as transformative even by those cynical about digital coins.
“Blockchain is the most over-hyped technology ever,” the New York University Professor told the Senate Banking Committee. “It is nothing better than a glorified spreadsheet or database.
“It is clear by now that Bitcoin and other cryptocurrencies represent the mother of all bubbles,” he added.
The attack contradicts proponents of blockchain including the Government’s science office, which argued in 2016 that the technology could “help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and services and generally ensure the integrity of government records and services.”
Roubini added that the nickname “s—coins” which is often used by cryptocurrency traders when referring to less valuable coins, was “a grave insult to manure”.
His scathing attack came as the cryptocurrency market took a battering off the back of tumbling global stock markets. Bitcoin dropped as much as 6.9pc to $6,080, its lowest point in two months. At its peak late last year Bitcoin was worth $20,000.
Traders claim Bitcoin’s selling point is that its decentralised nature leaves it immune from stock market volatility, acting more like a “digital gold”. But it appears that as the coin went mainstream, traditional investors are using traditional equity strategies, suggesting the crypto market could dip further if the stock markets continues downward, likes its fiat counterparts.
Industry champions were keen to paste over the cracks, with market analyst at cryptocurrency exchange platform eToro, Matt Newton sending out an email to assure that the fall was “a sign that the markets are working” and that “much of the ‘good news’ is currently happening behind the scenes”.
Governments are mulling whether to step in and regulate cryptocurrencies, which critics claim are vehicles for scams and money laundering.
China has already banned domestic exchanges and well as Initial Coin Offerings (ICOs), a form of crowdfunding. The US securities watchdog on Thursday halted an ICO which falsely claimed it had approval from the Securities and Exchanges Commission.