Mark Zuckerberg bats for Bitcoin, says cryptocurrency putting power into people’s hands; is he missing the point though?

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Updated: January 5, 2018 12:41:39 PM

Social media platforms such as Facebook, Twitter, Reddit have been major gainers in terms of social traffic courtesy dramatic rise in the worth of different cryptocurrencies lately.

fb ceo, fb mark zuckerberg, fb ceo grants harvard, harvard university, fb ceo help low income undergraduate, Priscilla ChanThere are important counter-trends to this – like encryption and cryptocurrency – that take power from centralized systems and put it back into people’s hands, says Mark Zuckerberg. (Photo: AP/PTI)

Keeping in tradition with other years, Facebook owner Mark Zuckerberg has issued a mission statement just as the new year begins. Unlike before, he concentrates more on putting power back into people’s hands, other than his task to fix Facebook, in a note published on the popular social networking site Facebook on 4 January. Amusingly, what seems to have struck the readers most are his views on the cryptocurrencies, which have taken the entire world by storm lately. He talks about how virtual currencies have successfully managed to shift the power-balance from a centralized system to the hands of a common man.

“There are important counter-trends to this — like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services,” Mark Zuckerberg writes on Facebook.

Despite the meteoric rise in the prices of popular cryptocurrencies such as Bitcoin, ethereum and others, market experts worldwide are not much enthused by the virtual currency. Banking industry leaders, governments and regulators across the world say that Not only are the private cryptocurrencies speculative, they are also bereft of any underlying value.

Cryptocurrency successfully married to social media

Of late, social media platforms such as Facebook, Twitter, Reddit have been major gainers in terms of social traffic centered around the conversations about cryptocurrencies such as Bitcoin. Private cryptocurrencies have tapped into the social media ecosystem and have rewarded it with cryptocurrency capabilities. Social media platforms also earn crucial revenues from the cryptocurrency-related advertisements.

What the governments are worried about

Governments all across the world have largely been worried about the regulatory aspect of the cryptocurrencies.

India: The Reserve Bank of India is not much enthused by the idea of trading in cryptocurrency. The central bank has issued four warnings till date about the potential economic, financial, operational, legal, customer protection and security related risks associated with dealing in such VCs. The income tax (I-T) department also issued notices to 4 lakh to 5 lakh high net-worth individuals (HNI) across the country who were trading on the exchanges just days after the taxman conducted surveys at nine such exchanges across the country. Market watchdog Sebi has also issued similar warnings last year. Finance Ministry on December 15 formed a new panel to frame response with respect to the Bitcoin issue.  The government in April this year had constituted a committee comprising nine members including representatives of RBI, SBI, NITI Aayog and Department of Financial Services to examine the existing framework on digital or cryptocurrencies both in India and globally and recommend measures for dealing with threats arising out of such virtual currencies such as money laundering  and others. The Centre had allotted a three-month time period to the panel for submitting this report. The panel had then said that Bitcoin (most popular cryptocurrency) is neither a currency nor a coin. It had further said that those dealing with cryptocurrencies in India should shut shop. The panel had suggested a law to declare Bitcoin illegal if the measures to curb it appeared ineffective.

 

South Korea: South Korea on December 13 banned its financial institutions from dealing in virtual currencies such as Bitcoin. The hyper-wired country has emerged as a hotbed for cryptocurrency trading, accounting for some 20 percent of global Bitcoin transactions — about 10 times its share of the world economy.

US: The US Securities and Exchange Commission sounded a warning Thursday about cryptocurrency risks, urging investors to “exercise caution” in dealing with units like Bitcoin. State and federal regulators may not be able to recoup any lost investments from illegal actors, the markets watchdog said.

What industry leaders and investors say

Legendary investors from India and around the world have time and again cautioned investors to stay away from it. Thomas Carper, a senior United States Senator once remarked, “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” Legendary investor Warren Buffett had said in an interview to CNBC in 2014 that bitcoin is a “mirage”, adding that investors should “stay away from it”.

In the same interview, Warren Buffett said, “It’s a method of transmitting money. It’s a very effective way of transmitting money and you can do it anonymously and all that. A cheque is a way of transmitting money, too. Are cheques worth a whole lot of money just because they can transmit money?… The idea that it has some huge intrinsic value is just a joke in my view.” Reiterating his belief on Bitcoins and cryptocurrencies, Warren Buffett told Marketwatch in October this year: “You can’t value bitcoin because it’s not a value-producing asset,” adding that it is a “real bubble in that sort of thing”.

The rapidly surging price of Bitcoin, without any underlying asset or value-base, has irked the top banker Jamie Dimon. “Bitcoin is a fraud and will blow up,” Jamie Dimon, the CEO of JPMorgan Chase, said earlier this year, adding, “The currency isn’t going to work.” He pointed out to the absence of an underlying monetary base to support its value. “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” Jamie Dimon said.

Renowned investor Jim Rogers, sometimes referred to as commodities guru, too has sounded a note of caution on the prospects of cryptocurrencies, preferring to stay away from them for now. “I wish I was smart enough to buy cryptocurrencies.” Jim Rogers said in an interview with Kitco news last year. Further, Jim Rogers seemed to suggest that there might be a bubble building up in the cryptocurrency space. “It looks bubblish when you see the kind of price we see in bitcoins,” Jim Rogers said, adding that he doesn’t own any of the cryptocurrencies. “I certainly don’t know which one will come out on top, or if anyone comes out on top. But, I don’t own any.”

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