Steven Mnuchin has changed his mind about Bitcoin (BTC) — at least a little. The former U.S. Treasury Secretary previously argued that Bitcoin didn’t have any value. But this week, he told CNBC’s Squark Box it’s “no different than buying gold or some other asset.”
“I think the underlying technology of blockchain is really incredible, and has lots of different things, particularly in fintech and finance,” he said.
Though people often talk about blockchain and cryptocurrency in the same breath, blockchain is actually the technology that powers cryptocurrencies like Bitcoin. Blockchain is a secure, sophisticated database technology that can cut the middleman out of a host of everyday transactions.
Mnuchin apparently won’t be running out to buy Bitcoin soon, but at least he’s not opposed to other people investing in the biggest digital currency. “I don’t personally want to have it in my portfolio, but if people want to, that’s perfectly fine,” he said.
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Why Bitcoin could be digital gold
Bitcoin’s been dubbed digital gold — a digital store of value — by many high-profile investors, including billionaire Mark Cuban.
A store of value is something non-perishable that won’t depreciate over time. Gold and other precious metals are popular stores of value. And Bitcoin does have several things in common with gold:
- It’s durable. It won’t deteriorate with time.
- It’s scarce. Only 21 million Bitcoin will ever be produced.
- Supply is steady. The way Bitcoin is mined means it would be nigh on impossible to suddenly flood the market with coins.
It’s also easy to break a Bitcoin up into smaller pieces and move it around. Such characteristics could make it an attractive gold alternative.
The problem is that it is still volatile. Bitcoin’s price today is almost half the all-time high it hit in April. A store of value isn’t useful if its worth can drop dramatically or even fall to zero. That’s why people remain cautious about calling Bitcoin a viable substitute for gold.
Mnuchin still believes regulation is essential
He may have softened his stance on Bitcoin, but Mnuchin is still concerned about the ease with which bad players could use digital currencies to launder money. The investment banker has regularly spoken out on this issue.
During his time as Treasury Secretary, Mnuchin promised “very, very strong” regulation, including proposals to crack down on anonymous wallets and increased know-your-customer requirements. In this week’s interview, he reiterated the need for Bitcoin to have “complete BSA and regulatory compliance.” BSA stands for the Bank Secrecy Act, introduced in the ’70s to curtail money laundering. The BSA requires that U.S. cryptocurrency exchanges register as Money Services Businesses and fulfill certain requirements.
Crypto regulation is a hot topic throughout the world as authorities work out how to control this sprawling industry. For example, the U.S. is considering a digital dollar, and looking at ways to tighten regulation.
Powell: Crypto doesn’t yet have appropriate regulation
When Federal Reserve Chair Jerome Powell testified before the U.S. House Committee on Financial Services this week, he stressed the need for “an appropriate regulatory framework, which frankly we don’t have.”
One challenge is that many different businesses fall under the cryptocurrency umbrella. These range from decentralized lending platforms to programmable blockchains. Some act more like currencies and others more like securities, but right now they are all regulated as commodities.
Authorities want to protect retail investors from scams and highly risky investments without stifling this developing industry.