Cryptocurrencies create ‘chaos’ for payments, says economist who predicted the financial crisis

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Economist Nouriel Roubini, best known for predicting the financial crisis, piled on his recent criticism of cryptocurrencies Thursday, saying they create “chaos” and confusion in the payments world.

“It’s totally inefficient. It’s never going to work,” Roubini said Thursday at the Fluidity Summit in Brooklyn. “You are going to the world of the Flintstones to buy any good you have to exchange, you go back to the Stone Age of bartering.”

Roubini, who earned the name “Dr. Doom” after the financial crisis, highlighted the difficulty of converting volatile digital currencies every time a user wants to buy something. Bitcoin, for example, rose more than 1,300 percent last year before losing roughly half its value in the first three months of 2018, according to CoinDesk.

While he’s bullish on digital payments through apps such as Alipay, Venmo, PayPal and Square, Roubini said blockchain and cryptocurrencies will not play a role in the future of finance.

“I’m affirmative on that significant disruption, but most of this has nothing to do with blockchain, nothing to do with cryptocurrency,” he said.

The economist also took on the fundraising process called initial coin offerings, or ICOs, calling them “mostly scams.”

He pointed to research by ICO advisory firm Satis Group, which said 81 percent of them were, as Roubini put it in a column published earlier Thursday, “created by con artists, charlatans, and swindlers looking to take your money and run.”

The economist, who is a professor at New York University’s Stern School of Business, debated Joseph Lubin, co-founder of Ethereum and CEO of ConsenSys. Ethereum is the world’s second-largest cryptocurrency by market capitalization behind bitcoin, with a market capitalization of about $74 billion, according to data from CoinMarketCap.com.

The digital coin is backed by a blockchain, much like bitcoin, but the technology is slightly different because it uses what’s known as “smart contracts.”

Lubin advocated for self-regulation in the space, and said his company ConsenSys is working on a database that forces projects to self-disclose, mostly through “peer pressure.”

But Roubini, who was a senior advisor to Treasury Secretary Tim Geithner, shot back.

“The reality is the industry does not self-regulate,” he said. “They’re Ponzi schemes. If you wanted to self-regulate you’d stop this, and you’re doing nothing about it.”

Roubini is known for his anti-crypto rhetoric and in a recent column called blockchain “one of the most overhyped technologies ever.”

Bitcoin was one of the first applications of the blockchain, which is a public ledger of bitcoin transactions that its proponents say is tamper-proof. Transactions on the bitcoin blockchain require verification from a number of different parties and are verified by so-called “miners” solving complex mathematical puzzles with high-powered computers.