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The president and CEO of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has expressed concern about consumer risk due to “fraud, hype, and confusion” surrounding bitcoin. Moreover, he said the cryptocurrency has been around for more than a decade but “there’s still no legitimate use case in an advanced democracy.”
Neel Kashkari, President and CEO of the Federal Reserve Bank of Minneapolis, shared his perspective on bitcoin during a conversation with Pensions & Investments Editor-in-Chief Jennifer Ablan at a Linkedin Live event on Thursday.
The head of the Minneapolis Federal Reserve Bank explained that he views bitcoin as a “consumer protection issue” because some investors do not fully understanding their cryoto investments. Moreover, he cautioned that cryptocurrencies are “so volatile that some people could be put in a lot of harm’s way.” Kashkari opined:
There’s a lot of fraud, hype and confusion so I am worried from a consumer perspective.
The Fed president compared bitcoin to Beanie Babies, stating that they have “no actual utility in the economy, other than being a nice toy that some people enjoy owning and trading.” He added that the only use cases he has seen for bitcoin are cases where traders are “trying to subvert banking regulations, get around either marijuana banking or illicit activities.”
Kashkari brought up Amazon (Nasdaq: AMZN) as a comparison. “The ‘Bitcoin bros’ would say…in 1994 nobody ever bought a book online, so Amazon has no future. This is not Amazon in 1994. This is Amazon in 2004.” He stressed:
Bitcoin has been around for more than a decade, and more than a decade later, there’s still no legitimate use case in an advanced democracy.
Many people disagreed with Kashkari on the use cases of bitcoin. Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation, for example, wrote on X: “Aside from the staggering ignorance (there are dozens of legitimate use cases for Bitcoin in an advanced democracy ranging from power grid management to sending money abroad to saving for your family’s future to micropayments to multisig treasury management to turning waste energy into profit to reducing methane emissions to building a surveillance-resistant digital commerce experience to donating to charity and I could literally keep going for a long time).” Noting that the Fed official’s “last two words are interesting,” Gladstein said:
Does that mean he thinks there’s a use case in a flawed democracy or a dictatorship? Maybe we are getting somewhere.
Kashkari, a long-time bitcoin skeptic, was more optimistic about cryptocurrency five or six years ago. However, he has become more critical of the asset class due to widespread fraud, hype, noise, and confusion in the industry. He has warned about the proliferation of “garbage coins,” describing some as complete fraud and Ponzi schemes designed to deceive investors.
