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  • Ex Greek finance minister Yanis Varoufakis said that BTC replacing fiat will make “capitalism uglier and nastier.”
  • He believes BTC is incapable of reacting to economic crises as its monetary policy is hardcoded and can’t be changed easily. 
  • Varoufakis said that blockchain technology, however, has significant potential. 

In a recent open letter, Yanis Varoufakis, a former Greek finance minister, said that Bitcoin should not replace fiat currency as it will only make “capitalism uglier, nastier and more dangerous for humanity.” However, he added that blockchain technology has scope and potential. 

Varoufakis believes that BTC cannot react to economic crises (such as the current pandemic). This is because its monetary policy is hardcoded and cannot be altered easily. 

Consider the Crash of 2008 or the more recent 2020 Covid-19-induced crisis. Suppose that Central Banks did not have the capacity instantly to create trillions of dollars, euros, pounds and yen – and instead had to rely on a spontaneous majority of Bitcoin’s users to agree to a massive increase in the supply of money. The result would be a 1929-like collapse of banks and corporations.

The former minister added that Bitcoin ownership is unequally distributed. According to him, people who have significant BTC holdings will not be happy with increasing its supply as it would devalue their holdings. If the cryptocurrency were to replace fiat money, it would only intensify the problem of wealth inequality during crises and help the rich retain “their private rents at the expense of the public interest.”

Varoufakis further noted that nothing would change at company levels as well. He opines that “Jeff Bezos will still control a massive monopsony-cum-monopoly” while other tech giants will continue to control their marketplaces and exploit weaker economies. Private banks will find new ways to create assets pegged to Bitcoin, as per Varoufakis. 

He said that Bitcoin replacing fiat will eventually create new depressions, which will be made worse by the coin’s inability (or the unwillingness of the rich) to increase its supply or adapt to crises. 

The ex-minister, however, noted that while Bitcoin might not be the answer to capitalism’s many issues, blockchain technology may become helpful in creating a new type of financial structure. 

Having said all this, a monetary commons (that may very well rely on something like the blockchain underpinning Bitcoin) will, I have no doubt, be an essential aspect of a democratized economy; of socialism.